Scaling Business for Management Consultants & Managers: A Practical Guide

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Scaling Business for
Management
Consultants & Managers
A practical guide on how to scale businesses in
practice fast and efficiently

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If you have managed to build a successful business that is also profitable, at some point you
will start thinking about scaling your business and drastically growing its size and profits.

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This will require a different approach than the everyday management of the business.
You need different frameworks to scale fast & efficiently the business.

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In this course, I will teach you how to find ways to scale the business fast &
efficiently. I will also show you how to prepare the organization for scaling.

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Target Group What you will learn What you will get
 Management Consultants &
Business Analysts
 Mangers
 CEO
 Directors
 How to scale different areas of
your firm
 How to identify the biggest
bottlenecks preventing you from
scaling
 How to estimate the speed of
scaling
 How to design your scaling process
 Ready made frameworks for
scaling
 Ready made analyses in Excel
 List of Recommended readings
(articles, books)

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Process of scaling Scaling Sales & Margin
What scaling means
Scaling Recruitment &
Training
Scaling Operations
Useful supporting
techniques
Scaling Training in
Consulting Firm
Scaling Consulting Business

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This course will help you fast and efficiently
scale your business on the level of top
management consultants

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What you will see in this presentation is a part of my online course where you
can find case studies showing analyses along with detailed calculations in Excel
Scaling Business for Management
$190
$19
Click here to check my course

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What scaling means –
Introduction

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Scaling can mean a lot of things. For some, it is simply growing sales. For others, it will be
around scaling profit. In this section, we will discuss what we mean by scaling the business.

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3 areas you have to scale
What can stop you from
scaling
Scaling definition
Removing bottlenecks –
case studies
Theory of constraints and
bottlenecks
How to increase production
capacity – case study
In this section we will talk about the following things

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Let’s start with a short definition
 The process of increasing significantly the profit, in a sustainable way
 Scaling should be done by design and not rely on luck
 For most cases, we will look at increasing EBITDA
 Scaling usually will require scaling not only sales but also scaling other
areas
Scaling =

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After
20
40
100
Before
10
10
10
We will often use the 2x, 4x, or 10x. This will mean that we increase the
size of the business 2, 4, 10 times.
2x
4x
10x

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Check the video on YouTube for more details
Click here to go to the video

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There will be 3 areas that you have to scale to scale the profit
Scaling
Sales & Margin Recruitment & Training
Operations

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On top of that, you have to make sure that you control the costs
Scaling
Operations
Cost Reduction

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Let’s see what options we have in those 3 areas
Scaling
Scaling Products
Scaling Customers
Scaling Brands
Retain Current Employees
Train faster and more
efficiently
Increase the pool of potential
candidates
Scaling Markets
Operations
Improve efficiency of existing
assets
Add assets
Change technology
Add partners Change technology
M&A of firms
Scaling Distribution
Add products that requires
less assets
Outsourcing

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There are some things that have to be in place before you start scaling
Unit economics
Standardize and implement
best practices
Money for scaling
Big enough problem
Long term thinking
Product-market fit

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scaling

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There will be always something stopping you from scaling. In other words, one
of the areas will be a bottleneck
Scaling
Operations

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Let’s imagine that you want to 5x the business. You have to check what growth
you can achieve with the current setup
Scaling
Operations
2x 4x 10x

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As you can see it seems that sales are the bottleneck as we can only scale here
2x
2x 4x 10x
Scaling
Operations

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If we work on this bottleneck and improve it, a new bottleneck will appear in
Operations where we can only 4x the business
5x 4x 10x
Scaling
Operations

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In the next lectures, we will have a look at a case study that will help us
understand this concept
Scaling Beer Business

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What can stop you from scaling
– Case Introduction

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Let’s have a look at how a beer producer can scale the business and
eliminate the obstacles, limits that may appear during this process.

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The company is based in Czech Republic
The company's annual sales in liters of beer
are 300 M
The CEO of the company considers scaling
the business
A few information about the firm
Let’s define what can potentially stop the
company from scaling

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Below you have the current situation mapped
300
500
600
Sales & Margin Operations Recruitment & Training
Beer business potential in following areas
In million of liters
The scale of the business
we can achieve
xxx Total capacity of the area

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Let’s have look at the description of possible steps
Scaling sales on current
markets
 Add new products – new flavors
 Add new brands – 0% beer
 Acquire new customers – beer
for women
Description Which Area it Impacts
Additional Capacity in this area
In M of liters of beer
 Sales  350
Scaling markets
 Start selling in different
countries
 Sales  550
Scaling existing operations
 Change production process
 Optimize processes
 Add new partners
 Operations  200
Building new factory
 Build new factory  Operations  300
Scaling recruitment & training
 Recruit new professionals
 Open offices in different city
 Attract new employees
 Recruitment & Training  200

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What can stop you from scaling
– Solution

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Just as a reminder we want to help scale a beer producer based in
Czechia. We will look at the step by step scaling of the business

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The company is based in Czech Republic
The company's annual sales in liters of beer
are 300 M
The CEO of the company considers scaling
the business
Let’s define what can potentially stop the
company from scaling

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From previous lectures we know, that one of the reasons the company
can't scale the business is that it faces a bottleneck
300
500
600
we can achieve

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Let’s see how the company should eliminate the bottleneck that affects
the potential development of the following business areas
300
500
600
350
 Add new products – new flavors
 Add new brands – 0% beer
 Acquire new customers – beer
for women
How we can change it?
650
we can achieve

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300
500
600
350
200
 Change production process
 Optimize processes
 Add new partners
650 700
we can achieve

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300
500
600
350
200
200
 Recruit new professionals
 Open offices in different city
 Attract new employees
650 700 800
we can achieve

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300
500
600
350
200
200
550
How we can change it?  Start selling in different
countries
1 200 700 800
we can achieve

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300
500
600
350
200
200
550
300
How we can change it?  Build new factory
1 200 1 000 800
we can achieve

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What you should concentrate on
– Examples

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Different firms, industries have to concentrate on different areas. Let’s have a
look at some examples of what is the main obstacle for different types of firms.

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Let’s have a look a some examples
Scaling
 Procter and Gamble
 Coca – Cola
 Google
 Facebook
 McKinsey & Company
 Law Firms
 Uber
 Transportation Firms
 Procter and Gamble
 Coca – Cola
 Amazon  Amazon
 Google
 Facebook
 McKinsey & Company
 Law firms
 Uber
 Transportation Firms
FMCG
E–commerce
Marketplaces
Technology
Professional
Services
B2C Services
 Amazon

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scaling
Scaling definition
case studies
bottlenecks
Just as reminder we said that we will talk about the following things

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scaling
Scaling definition
case studies
bottlenecks
We know what scaling means. It’s time to concentrate on ways to
remove bottlenecks

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In the production case study in which we will try to increase capacity in
different ways, remember that the capacity is a proxy for the scale
Scale of the business
≈
Capacity

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Bottlenecks are dangerous as their hurt the efficiency of the whole system

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Example 1
7 5 7
Example 2
5 10 20
Example 3
5 5 3
x Stage capacity
What is the throughput of every system and where is the bottleneck?

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The are 4 rules that you should follow when it comes to bottlenecks
 Identify what is the bottleneck
 Increase its throughput by lowering the time needed for everything that goes
through the bottleneck
 Add new resources to bottleneck
 Adjust everything to the bottleneck – so it works at the same pace

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Imagine that you are working in a company working in a content marketing
Research topics for a
post
Write a post Create illustration
Edit and modify
post, add illustration
and schedule
20 5 7 10
# of post that can be done in
a week by 1 person
 Speed up the writing process (faster typing,
better tools, shortcuts for the most popular
words)
xx
20 8 7 10
10 9 10 10
 Make the researcher do also par time
writing and making illustration
 We have almost doubled the production of post with the same resources
 The same principles would apply if all the activities were done only by you – in this case, it would mean that you
should not do too much research and illustration but rather improve the typing speed and match the number of
illustrations and researches to your capacity in writing
 If you have no impact on the process (you are one of the guys above just doing his own part and your boss does not
want to listen to you then simply do less – identify the bottleneck and adjust your speed to his speed.
 On the other hand if you are the bottleneck then speed up because the whole team depends on you.

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Content marketing agency –
Introduction

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Your friend Ivan works in a content marketing agency and wants to
improve the work of his team. Help him using the bottleneck framework

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A few things about Ivan team
He manages 4 people
Every person specializes only in
1 area
You measure your success in
number of posts produced

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Below you can see the production capacity for each and every stage.
1 person works on 1 stage only
post
Edit and modify
and schedule
20 7 10
# of post that can
be done in a week
by 1 person
xx
5

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Content marketing agency –
Solution

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Your friend Ivan works in a content marketing agency and wants to
improve the work of his team. Help him using the bottleneck framework

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Just as a reminder a few information about the content marketing
agency
He manages 4 people
Every person specializes only in
1 area
You measure your success in
number of posts produced

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Let’s see how we could increase production of posts
post
Edit and modify
and schedule
20 5 7 10
# of post that can be done in
a week by 1 person
 Speed up the writing process (faster typing,
better tools, shortcuts for the most popular
words)
xx
20 8 7 10
10 9 10 10
 Make the researcher do also par time
writing and making illustration
 We have almost doubled the production of post with the same resources
 The same principles would apply if all the activities were done only by you – in this case it would mean that you
should not do too much research and illustration but rather improve the typing speed and match the number of
illustration and researches to your capacity in writing
 If you have no impact on the process (you are one of the guys above just doing his own part and your boss does not
want to listen to you then simply do less – identify the bottleneck and adjust your speed to his speed.
 On the other hand if you are the bottleneck then speed up because the whole team depends on you.

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Production Capacity Improvement –
Case Introduction

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Now imagine that you were asked to increase the production capacity of a factory.
Try also to calculate the financial impact of the proposed scenarios.

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A few things about the firm
The product has to go through 3
stages
1 ton of product generates USD 30 of
margin after variable costs
You want to see to what level you can
increase production
Try to also estimate the impact on the
annual EBITDA of proposed changes

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Before we look at specific scenarios, we have to discuss 2 issues
What the production
capacity depends on?
How to calculate
monthly production
capacity

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What the production capacity
depends on?

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First let’s see what the production depends on assuming there is just 1
production stage
# of hours when
we were producing
=
Total number of
units produced
Units produced per
1 hour of work
x
Available time in
hours
x
% of Time used for
production
=
Total number of
units produced
Units produced per
1 hour of work
x
# of hours when
we were producing
Available time in
hours
x
% of Time used for
production
=

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Let’s calculate a simple example
Available time in
hours
x
% of Time used for
production
=
Total number of
units produced
Units produced per
1 hour of work
x
24 x 50%
=
Total number of
units produced
10
x = 120

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Now let’s imagine that we increase the % of Time used for production to 70%
Available time in
hours
x
% of Time used for
production
=
Total number of
units produced
Units produced per
1 hour of work
x
24 x 50%
=
Total number of
units produced
10
x = 120
24 x 70%
=
Total number of
units produced
10
x = 168

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The same results can be achieved by increasing units producer per 1 hour of
work
Available time in
hours
x
% of Time used for
production
=
Total number of
units produced
Units produced per
1 hour of work
x
24 x 50%
=
Total number of
units produced
10
x = 120
24 x 70%
=
Total number of
units produced
10
x = 168
24 x 50%
=
Total number of
units produced
14
x = 168

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Finally let’s see what other names we can use for this drivers of capacity
Available time in
hours
x
% of Time used for
production
=
Total number of
units produced
Units produced per
1 hour of work
x
Available time in
hours
x
Overall Equipment
Efficiency (OEE)
=
Total number of
units produced
Throughput per 1
hour
x

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How to calculate the capacity for
the whole month

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We said that the production depends on 3 drivers
Available time in
hours
x
% of Time used for
production
=
Total number of
units produced
Units produced per
1 hour of work
x
Available time in
hours
x
Overall Equipment
Efficiency (OEE)
=
Total number of
units produced
Throughput per 1
hour
x

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Now let’s see how it looks like for the whole month
Available time in hours
During the month x
Overall Equipment
Efficiency (OEE)
=
Total number of units
produced during the
month
Throughput per 1 hour
x
Available time in hours
During the month =
# of days during the
month when we work x
# of working hours per
day of work
produced during the
month
=
day of work x
Overall Equipment
Efficiency (OEE)
x

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Let’s have a look at a simple example
800 = 20 x 8 x 50% 10
x
produced during the
month
=
day of work x
Overall Equipment
Efficiency (OEE)
x

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You can increase production by changing different drivers
800 = 20 x 8 x 50% 10
x
produced during the
month
=
day of work x
Overall Equipment
Efficiency (OEE)
x
1 200 = 30 x 8 x 50% 10
x
1 200 = 20 x 12 x 50% 10
x
1 200 = 20 x 8 x 75% 10
x
1 200 = 20 x 8 x 50% 15
x
4 050 = 30 x 12 x 75% 15
x

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Production Capacity
Improvement – Scenarios

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Just as a reminder a few things about the firm
The product has to go through 3
stages
1 ton of product generates USD 30 of
margin after variable costs
You want to see to what level you can
increase production
Try to also estimate the impact on the
annual EBITDA of proposed changes

80
In previous lectures we said that the monthly production depends on 4
drivers
produced during the
month
=
day of work x
Overall Equipment
Efficiency (OEE)
x

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Let’s instead of hours and throughput per day use hours and throughput
per shift
produced during the
month
=
day of work x
Overall Equipment
Efficiency (OEE)
x
produced during the
month
=
month when we work x # of shifts per day x
Overall Equipment
Efficiency (OEE)
Throughput per 1 shift
x

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In the case study we have 3 stages not one. So first we have to calculate
the potential capacity per stage
Total # of units going
through Stage 1 =
month when Stage 1
works
x
# of shifts per day for
Stage 1 x OEE for Stage 1
for stage 1
x
through Stage 2 =
month when Stage 2
works
x
for Stage 2
x
through Stage 3 =
month when Stage 1
works
x
for Stage 3
x
Total # of units
Produced =
Minimal # of units
going through every
stage

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In previous lectures we said that the monthly production depends on
number of drivers
through Stage 1 = 30 x 2 x 60% 12
x
x
x
Total # of units
Produced =
Minimal # of units
going through every
stage

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In previous lectures we said that the monthly production depends on
number of drivers
through Stage 1 =
through Stage 2 =
through Stage 3 =
Total # of units
Produced = 432
432
720
540

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In the 1st scenario assumes that you will increase OEE for stage 1
The bottleneck is the stage 1 of
production
We want to increase the production
by moving OEE
Assume that you increase OEE from
60% to 70%
The change will require capex of USD
20 K

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In the 2nd scenario assumes that you will increase the throughput for
stage 1
production
We want to increase the throughput
per shift
Assume that you increase throughput
from 10 to 16
The change will require capex of USD
30 K

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In the 3rd scenario assumes that you will increase the number of shifts
for stage 1
production
We want to increase the number of
shifts when we work
Assume that you increase the number
of shifts in stage 1
The change will require additional
Opex of USD 20 K

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In the 4th scenario assumes that you will combine all improvements
production
Combine all improvements from
scenarios 1-3
Remove the bottleneck in stage 3 –
increase throughput
The change will require additional
Opex of USD 20 K & Capex of 80 K

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For more details and content check my online course where you can find case
studies showing analyses along with detailed calculations in Excel
$190
$19

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Process of scaling
– Introduction

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In this section, I will show you what process you
can use to scale your business more efficiently.

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Backward logic – definition
How to apply backward
logic to scaling – case study
in Retail
How the process of scaling
can look like
How to apply the process
to burger chain – case
study

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How to process of scaling can
look like

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Let’s have a look at the process of scaling
Set a goal Use backward logic
Check capacity of
every area
Identify and remove
bottlenecks
Implement
 Set the goal which
you want to achieve
 When the goal is
known divide it into
sub-goals to make it
easier to define
what has to be
done
 Define by when you
want to achieve it
(deadline)
 Once you know the
goal and by when it
should be achieved
use backward logic
to estimate what it
implies
 Calculate what
should be the pace
of growth to
achieve the goal by
the deadline
 Define what should
be done
 Next, define how it
should be done
 Create a detailed
plan / steps to know
what resources will
be needed
 Check and measure
the capacity of the
following business
areas:
o Sales & Margin
o Operations
o Recruitment &
Training
 This exercise will
help you determine
in which business
area changes
should be made
first
 Identify bottlenecks
of the scaling (what
area is the
bottleneck)
 Create a list of
potential solutions
that will help you
deal with the
bottleneck
 Estimate the best
way (cheapest,
fastest, requiring
fewer assets) to
remove the
bottleneck
 Pick the way to
remove the
bottleneck
 Do the necessary
changes to remove
the bottlenecks
 Once you remove
the current
bottleneck start the
process from the
Check capacity of
every area stage to
find the next
bottleneck

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Scaling Burger Chain
– Case Introduction

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Let's imagine that you have to create a plan for how to scale the burger
business. Using information from previous lectures, prepare the draft.

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Let’s have a look at some basic information that we know about the business
The company is based in Poland
Annual revenues are EUR 50 M and they
want to increase them to EUR 1 000 M
The firm has 20 restaurants all over the
country
The CEO of the company would like to
see the plan of scaling the business

100
Apply the framework that we have discussed
Set a goal
Use backward logic
to define the pace of
growth
Check capacity of
every area
Identify and remove
bottlenecks
Implement
you want to achieve
easier to define
what has to be
done
want to achieve it
(deadline)
goal and by when it
should be achieved
use backward logic
to estimate what it
implies
 Calculate what
should be the pace
of growth to
achieve the goal by
the deadline
the capacity of the
following business
areas:
o Sales & Margin
o Operations
o Recruitment &
Training
help you determine
in which business
area changes
should be made
first
area is the
bottleneck)
potential solutions
that will help you
deal with the
bottleneck
 Estimate the best
way (cheapest,
fastest, requiring
fewer assets) to
remove the
bottleneck
 Pick the way to
remove the
bottleneck
changes to remove
the bottlenecks
 Once you remove
the current
process from the
Check capacity of
every area stage to
find the next
bottleneck

101
Scaling Burger Chain
– Case Solution

102
Just as a reminder we have to create a plan for how to scale the burger business.
Let’s have a look at how we can adjust the general process to this situation.

103
Let’s have a look at some basic information that we know about the business
The company is based in Poland
The firm has 20 restaurants all over the
country
The CEO of the company would like to
see the plan of scaling the business

104
Apply the framework that we have discussed
Set a goal
Use backward logic
growth
Check capacity of
every area
Identify and remove
bottlenecks
Implement
you want to achieve
easier to define
what has to be
done
want to achieve it
(deadline)
goal and by when it
should be achieved
use backward logic
to estimate what it
implies
 Calculate what
should be the pace
of growth to
achieve the goal by
the deadline
the capacity of the
following business
areas:
o Sales & Margin
o Operations
o Recruitment &
Training
help you determine
in which business
area changes
should be made
first
area is the
bottleneck)
potential solutions
that will help you
deal with the
bottleneck
 Estimate what the
best way (cheapest,
fastest, requiring
fewer assets) to
remove the
bottleneck
 Pick the way to
remove the
bottleneck
changes to remove
the bottlenecks
 Once you remove
the current
process from the
Check capacity of
every area stage to
find the next
bottleneck

105
Let’s have a look how the process of scaling burger business should look like
Set a goal
Use backward logic
growth
Check capacity of
every area
Identify and remove
bottlenecks
Implement
 The main
company’s goal is to
increase revenues
from EUR 50 M to
EUR 1 000 M in 10
years from now
 The firm has to
grow almost 10x.
This means that it
has to add almost
EUR 100 M every
year
 Since 1 restaurant
generated EUR 2.5
M it means that you
have to open every
year 40 restaurants
 Part of the growth
may be achieved by
Increasing revenue
per 1 restaurant
 If you assume
growth per 1
restaurant check
the implications
 Burger chain will
most likely have a
limited capacity in 2
areas
o Operations
o Recruitment &
Training
To identify
bottlenecks:
 Check what stops
you from opening
more restaurants
(too high costs of
opening, lack of
money for Capex,
lack of shopping
malls, lack of
machines, etc.)
 Check what stops
you from hiring
and training
people (lack of
people on the
market, too low
salaries, too many
people per 1
restaurant)
If the problems were in
operations removing
bottleneck could mean
 Revise Capex and
specification of the
store to make it
cheaper
 Find money to
finance growth
 Create new
concepts for
suburbs
 Build own
standalone stores
 Consider Shop in
Shops
 Take over existing
chain
 Find a new supplier
of machines

107
Imagine that you were supposed to say how much you have to
spend to create a company that has revenue of $ 100 M dollar
Imagine that you were supposed to say how much you have to
spend to create a company that has revenue of $ 100 M dollar

108
You could use for that the so called backward reasoning
CC: Flickr; Cycle Track

109
Imagine that you were supposed to say how much you have to spend to
create a company that has revenue of $ 100 M dollar
Total Costs
$ 400 M
Cost of 1 lead
$ 2 K
# of leads
200 K
÷
% Conversion
10%
x # of customers
20 K
Average revenue
per customer
$ 5 K
Revenues
$ 100 M
x

110

111
Backward logic based decisions –
Case Introduction

112
Let’s try to put the backward reasoning to practice. In this case study we will
use it to decide what effort has to be done to 10x the current business

113
A few information about the retailer
He has currently 100 stores. Each store
sales are equal to EUR 2 M
He wants to 10x the business up to
Year 5
Estimate what LFL growth he must get
and how many stores he must open
Assuming EUR 1 M per store estimate
the Capex
Estimate how many people he has to
recruit assuming 6 people per store

114
Backward logic based decisions –
When it makes sense to use it

115
Backward logic can be used in many situations. Below some of them
You have a clear goal in the future
but not a clear path towards it
You want to estimate the pace
needed to reach the goal
You want to check the implications
for you or your department
You want to see what are the
limitations preventing you from
reaching the goal
You want to see whether the goal is
not too ambitious
You want to see whether the goal
does not require too big resources

116
Why we need frameworks for
scaling

118
Scaling Sales & Margin –
Introduction

119
In this section, we will discuss how
you can Scale Sales & Marketing.

120
Just as a reminder scaling the business requires scaling 3 areas and controlling
costs
Scaling
Operations
Cost Reduction

121
In this section, we will talk about Scaling Sales & Margin as well as Cost
Reduction
Scaling
Operations
Cost Reduction

122
In Scaling Sales & Margin we had 5 different options
Scaling
Scaling Products
Scaling Customers
Scaling Brands
Retain Current Employees
Train faster and more
efficiency
Increase the pool of potential
candidates
Scaling Markets
Operations
Improve efficiency of existing
assets
Add assets
Change technology
Add partners Change technology
M&A of firms
Add products that requires
less assets
Outsourcing

123
We will discuss scaling Sales & Margin but for that, we will use 2 case studies
Cosmetics Firm Retail business

124
Increase sales framework –
Retail & B2B Services
Cost reduction framework
Increase sales framework –
consumer goods
Examples how to use the
frameworks in practice
Increasing margins
framework – Retail & B2C
Services
Case studies of firms
scaling sales

125
General Framework for Scaling
Sales

126
Let’s have a look at scaling sales framework
Scaling sales
Create new istribution
points – exising
channels
Create new distribution
channels
M&A of distribution
firms
Scaling Products
Expande existing
products
Create new (for us) but
known products
Create totally new
products
Scaling Customers
Get bigger share in
exisitng customers
Get new customers in
existing segments
Get new customers in
new segments
Scaling Brands
Create new brands for
exisitng customers
Create new brands for
new customers
M&A of brands
Scaling Markets
Penetrate current
markets
Increase the size of the
market
M&A firms from
existing markets
Acquire ready-made
products
M&A firms from new
markets
Enter organically new
markets

127
Increasing sales framework –
Consumer Goods

128
Let’s have a look at the general framework we can use to increase sales
in consumer goods
Increase sales
Increase Distribution Increase Product Range Price & Discount Policy
Increase demand for
your product
Bigger share on the shelves in
the current distribution
Better penetration of existing
channels
Enter new channels
Enter new markets (regions,
countries)
New products within existing
categories
New categories within
existing brands
New brands
Changing price structure
Changing discount policy
Changing prices formula
Increase consumption per
capita
Shorten the lifespan of the
product
Find new customers

129

130
Increasing sales framework –
Retail & B2C Services

131
Let’s have a look at the general framework we can use to increase sales
in Retail and B2C Services
Increase sales
New stores LFL / same store growth New Brands New Channels
Build faster more stores
Create new formats within
existing brand
countries)
Bring more traffic to existing
stores
Improve % conversion
Increases Average Transaction
Value (ATV)
Create new retail brands for
the same segment but within
the same product range
Create new retail brands for
different segments but within
the same product range
Create totally new retail
concept (different product
and segment)
Own online
Marketplaces and other
online stores
Franchising
Wholesaling
Increase selling space within
existing stores

133
Let’s have a look at the general framework we can use to cut costs
Cut costs
Reduce usage Automate
Optimize process and
costs
Renegotiate contracts
Eliminate fully certain
expenses
Change specification – use less
of certain thing
Change specification – use
cheaper substitute
Standardized the process
using the best practice
Automate with software
Automate with machine
Simplify and optimize
processes
Replace Opex with capex
(analyze Opex vs capex
tradeoff)
Make it or buy it analyses and
if needed outsource or buy
outside
Renegotiate contracts with
current suppliers
Change the supplier
Change the form of using (i.e.
owing something instead of
leasing)

134

135
Increasing margins framework –
Retail & B2C Services

136
Let’s have a look at the general framework we can use to increase
margins in Retail & B2C Services
Increase gross margin
Improve space
productivity
Renegotiate contracts Price & Discount Policy Private Labels (PL)
Increase the space devoted to
more profitable products
Change the store layout to
have the best sellers in the
best places
Cross-selling of higher margin
products
current suppliers
Change the supplier
Get additional money / back
margin from suppliers
Changing price structure
Changing discount policy
Sell more in 1st price (full
prices)
Increase the share of the PL In
a specific category
Introduce PL in new categories
Promote PL outside your retail
channels

137
How to increase the profitability for
cosmetics producer – Problem

138
Imagine that you are working for a cosmetics producers. And you have
to increase his profitability
2 brands. 1 stong in Poland the
other in Romania
No e-commerce
Penetration in some regions is
stronger than in others
Has 2 Head Quarters (in Romania
and in Poland) and 4 factories
Every factory has different supplier
base and buys independently

139
Divide your answer into 2 fields
Increase sales Cut costs

140
cosmetics producer – Sales Increase

141
Let’s have a look how we can increase sales in the cosmetics
Increase sales of
cosmetics
Increase distribution Increase Product Range Price & Discount Policy
Increase demand for
your cosmetics
Add e-commerce
Improve sales in the regions in
which you are under-
represented
Enter other new channels or
enter new markets (regions,
countries)
Increase your shelf space
within the existing partners
Consider introducing the
Polish brand in Romania and
Romanian brand in Poland
Add new products within
existing categories
Add new categories within
existing brands
Changing price structure. Look
at the prices vs competitors
Changing discount policy used
toward channels
Changing pricing for specific
channels
Increase consumption per
capita
Find new segments of
customers i.e. different age
groups / men
Find new customers

142
cosmetics producer – Cost Reduction

143
Let’s have a look how you can cut costs in a cosmetics producer
Cut costs
Improve factories Standardize the product
Reduce head offices
costs
Renegotiate contracts
Optimize process in the
factories using best practices
lean manufacturing, TOC
Consider consolidating the
production in smaller number
of factories
Automate production if
necessary
Check how similar the
products are
Standardize materials or
products
Create 1 universal version for
all markets
Go through the Head Offices
costs and organizational chart
and check the overlaps
Consolidate some functions in
1 place and reduce FTE
Get best practices and
implement them in both
Consolidate purchases of main
materials in 1 -2 places
Consolidate suppliers
current suppliers or get new
ones
processes at the head-office

144
How to increase the profitability of
a retail chain – Problem

145
Imagine that you are working for a fashion discounter that operates a
retail chain in Easter Europe
Sells mainly cheap fashion, toys and
small items for the home
No e-commerce
Competes with other low cost
discounters and hypermarkets

146
Let’s have a look at some KPIs for the firm you are advising and their
competitor
Size
Profitability
Pace of growth
Cash
generation
Debt level
 Revenues
 % EBITDA
 % Gross Margin
 # of new stores
 LFL Growth
 Cash to EBITDA ratio,
 Inventory in DOS
 Payables in DOS
 Debt to EBITDA ratio
Your Customer Competitor 1 Competitor 2
 USD 2 000 M
 8%
 45%
 30
 2%
 50%
 140
 70
 5.5
 USD 1 000 M
 15%
 55%
 10
 5%
 55%
 90
 150
 1
 USD 3 000 M
 17%
 57%
 100
 5%
 40%
 120
 200
 2
Costs
 Head office as % of Sales
 Average # of employees per
managers and directors
 # of managers and directors
 11%
 4
 80
 7%
 6
 30
 8%
 10
 70

147
Divide your answer into 2 fields
Increase sales & Margin Cut costs

148
How to increase the profitability of a
retail chain – Solution – Sales Increase

149
Just as a reminder you are working for a fashion discounter that
operates a retail chain in Easter Europe
No e-commerce

150
Let’s first start by analyzing the sales and margin increase

151
competitor
Size
Profitability
Pace of growth
Cash
generation
Debt level
 Revenues
 % EBITDA
 % Gross Margin
 # of new stores
 LFL Growth
 Payables in DOS
 USD 2 000 M
 8%
 45%
 30
 2%
 50%
 140
 70
 5.5
 USD 1 000 M
 15%
 55%
 10
 5%
 55%
 90
 150
 1
 USD 3 000 M
 17%
 57%
 100
 5%
 40%
 120
 200
 2
Costs
 11%
 4
 80
 7%
 6
 30
 8%
 10
 70

152
Let’s have a look how we can increase sales and margin for our
customer
Increase sales & margin
Open more new stores
Find ways to increase LFL
sales
Expand some categories Gross Margin
Build faster more stores in
existing markets – 2x or 3x
countries)
Create new formats if needed
Bring more traffic to existing
stores
Improve % conversion
Increases Average Transaction
Value (ATV)
Check sales and margin
densities per category
Consider expanding some
categories
Consider totally new
categories for the same target
group
Renegotiate with suppliers
Do value engineering
Look for cheaper suppliers
Consolidate some products or
suppliers
Increase selling space within
existing stores

153
How to increase the profitability of a
retail chain – Solution – Cost Reduction

154
Just as a reminder you are working for a fashion discounter that
operates a retail chain in Easter Europe
No e-commerce

155
Let’s first have a look at how to cut costs

156
competitor
Size
Profitability
Pace of growth
Cash
generation
Debt level
 Revenues
 % EBITDA
 % Gross Margin
 # of new stores
 LFL Growth
 Payables in DOS
 USD 2 000 M
 8%
 45%
 30
 2%
 50%
 140
 70
 5.5
 USD 1 000 M
 15%
 55%
 10
 5%
 55%
 90
 150
 1
 USD 3 000 M
 17%
 57%
 100
 5%
 40%
 120
 200
 2
Costs
 11%
 4
 80
 7%
 6
 30
 8%
 10
 70

157
Let’s have a look how we could cut costs in the Retailer
Cut costs
Reduce Head-office costs
Improve inventory
management
Reduce Store costs Renegotiate contracts
Decrease the number of
directors and managers
Simplify the structure
processes in the Head-office
Check why they keep so high
level of stock and change the
algorithm / policies
Sell deadweight stock (non-
rotating)
Keep more stock in the central
warehouse
processes in the stores
Replace Opex with capex
(analyze Opex vs capex
tradeoff)
Destock the stores
Renegotiate contracts to
increase the payment terms
Make the supplier do certain
things currently done by you
Look for optimal size of
logistic delivery batches

158
Scaling Sales and Margin
– Amazon

159
Let’s see how Amazon has scaled Sales & Margin
Scaling Sales & Margin
Get Walmart distribution
experts
Expand warehouse &
Fulfilment centers
M&A of Whole Foods –
grocery retail chain
Scaling Products
Increase number of
products across 17
marketplaces
Add constantly new
categories
Switching form e-
commerce to
marketplaces
Scaling Customers
Simplify online shopping
– 1-click buy
Suggested products using
AI & Review system for
products
Amazon Prime &
shortening delivery time
Scaling Brands
M&A of competitors
Introduce private labels
brands: Amazon Basics,
Presto, Solimo etc.
Amazon positioned as a
search engine
Digital brands: Amazon
Kindle, Audible
B2B brands: AWS,
Amazon Direct Publishing,
Merch by Amazon
Scaling Markets
Create separate sites for
different markets and
localized offer
Aggressive marketing
campaigns
Sell products outside the
markets on which they
are present
Invest in Google AdWords
to re-direct traffic to
Amazon
Remove obstacles &
frictions in online world
Alexa / Amazon Echo –
new way to order fast
Offer subscription of
products
Create sub-marketplace
i.e. Handmade
Sell digital products
Create own retail chains
i.e. Amazon Go, Amazon
Books
M&A other firms i.e.
Zappos
M&A of other firms i.e.
Twitch, IMDb
Cross-selling of products –
Kindle & Audible
Enter B2C services – most
likely healthcare

160

161
Scaling Sales & Margin–
Beer Producer

162
Beer production is dominated by 3 groups: Heineken, Carlsberg and
AB InBev. They have used similar tactics in scaling operations.

163
Let’s see how beer producers have scaled Sales & Margin.
Scaling Sales and Margin
Bigger share on the
shelves
Increase Weighted &
Numeric Distribution
Create own logistics to
reach more customers
Scaling Products
Different tastes of beer
adjusted to local taste
Low alcohol beer
Non-alcoholic beverages
Scaling Customers
Convince customers to
drink more beer
Create low-calories beers,
and low alcohol beer
Convince to drink beer in
the winter (warm beer)
Scaling Brands
Expand the reach of the
main local brands
Introduce international
brands they own
M&A small craft beer
brands
Create brands that
pretend to be craft beers
Scaling Markets
Penetrate markets they
operate on
Increase the general beer
consumption
Alter the law – make it
more difficult to drink
vodka, wine etc.
M&A firms from existing
markets
M&A firms from new
markets
Create beer aimed at
wine consumers (fruit
based)
Beer aimed at women
(usually lighter, sweeter)
Copy craft beers
Introduce other alcoholic
products (i.e. cider)
Direct distribution to
HORECA
Special deals with Cinema
chains, events organizers,

165
Scaling Operations
– Introduction

166
In many cases, the firms have to be very creative when it comes to Scaling
Operations. In this section, we will look again at frameworks and case studies.

167
Scaling Operations –
Amazon
Beer Producer
General Framework for
Scaling Operations
Chicken Meat Producer
Airlines

168
Operations

169
Let’s have a look at the scaling operations framework
Scaling operations
Improve the
efficiency of existing
assets
Optimize processes
Remove bottleneck
Automate
Add assets
Create assets
Buy / rent assets
Use partners assets
Change technology
Switch to more
available materials
Find technology that
requires different
assets
Find cheaper
technology
Add partners
Recruit new partners
Create ecosystem that
helps the growth of
partners
Make it easier to
become a partner
Take over partners
Take over the area
(Vertical Integration)
Add products that
requires less assets
Modified products
requiring less assets
Digital Products
Products Delivered by
others
M&A firms
Reduce Inventory Services

170
Scaling Operations
– Amazon

171
Automate store work
(Amazon Go)
Amazon Lockers, Drones,
self driving, zeppelins
Let’s see how Amazon has scaled its operations
Scaling Operations
Improve efficiency
of existing assets
Improvement of
fulfilment & warehouse
processes
KPI system that measures
efficiency and set goals
Automate work (Amazon
Robotics)
Add assets
Add constantly new
fulfillment centers
Buy & Rent trucks, planes
etc.
Use partners assets for
the last mile – Amazon
Flex
Change technology
Automate warehouse
work (Amazon Robotics)
Add partners
Switch from e-commerce
to marketplace
Make it easier to sell –
Fulfillment by Amazon
Providing short-term
business loans to sellers –
Amazon Lending
Make easier self
publishing – Amazon
Direct Publishing
Optimization of process
of adding new partners –
Amazon Marketplace
Add products that
Amazon Kindle / Audible
Amazon Video
Amazon Prime
Advertising on Amazon
M&A of Twitch, Audible
Acquisition Of Whole
Foods, Zappos
Vertical Integration –
Amazon Web Service

172

173
Beer Producer

174
Beer production is dominated by 3 groups: Heineken, Carlsberg and
AB InBev. They have used similar tactics in scaling operations.

175
Let’s have a look at the scaling operations framework
Scaling Operations
Improve efficiency
of existing assets
Optimize brewing
process
Remove bottlenecks in
the supply chain
Automate
Add assets
M&A of main players
on other markets
Expand acquired assets
(factories)
Create own distribution
systems
Change technology
In some cases they
switch from malt to
barley
Adopt new packaging
types
Automation
Add partners
Help partners develop
supporting business
Partners include: malt
producers, farmers,
drivers
Help partners lower
costs i.e. buying groups
Take over malt
production
Take over packaging
production
Add products that
Low alcohol light beers
Non-alcoholic
beverages
Investments in assets
in other part of value
chain
Reduce Inventory in
the supply chain
Heat and energy re-
usage
In some cases take over
barley production
Speed up brewing
process

176
Chicken Producer

177
Now let’s see how meat producers scale their operations. As
an example, we will use here a chicken meat producer

178
Let’s have a look at how chicken producer scale their operations
Scaling operations
Improve efficiency
of existing assets
Find optimal life of a
chicken
Automate
Speed up meat growth
Add assets
Organic growth of
factories, farms
M&A of factories,
farms, etc.
Create own distribution
systems
Change technology
New races of chickens
New feed mixtures
Automation
Add partners
Help partners develop
supporting businesses
Main partners: chicken
farms and grain farms
Help partners lower
costs i.e. buying groups
Take over chicken
breeding
Take over growing
grain
Add products that
Chicken meat /
sausages with additives
Chicken meat / with
vegetables
Investments in assets
in other part of value
chain
Utilize the space
efficiently
Growing meat in labs
Keep the chickens close
to the factory
Ready made dishes
using chicken meat

179
Scaling Operations in Airlines –
Case Introduction

180
Let's imagine that an airline company is considering scaling the
business. Help them estimate what it will mean for them.

181
The airlines hubs are located in Easter
Europe
The company operates around 120
destinations
You were asked to estimate what they will
need to do to scale the business

182
$190
$19

183
Scaling Recruitment & Training

184
Scaling Recruitment & Training –
Introduction

185
Let’s have a look how the process of Scaling
Recruitment & Training should look like.

186
Training – Amazon
Training –
Retailers
General Framework for
Training

187
Recruitment & Training

188
Let’s have a look at the general framework for Scaling Recruitment &
Training
Training
Retain Current
Employees
Train faster and
more efficiently
Increase the pool
of potential
candidates
Change
technology
M&A of firms Outsourcing
Development
programs
Pay according to
qualification &
merits
Pay above the
market
Online training
courses
Working across
departments
Coaching &
mentoring
Build offices /
factories in
different cities
Remote work
Allow people to
work half-time
Use assets to
increase
productivity
Replace employees
with software
Replace employees
with machine
M&A of firms
instead of organic
growth
Acqui-hiring
Temporary
employment
agencies
Employee leasing
Full outsourcing
Hire minorities
Fire the wrong
people
A mix of
experienced and
new employees
Go to countries
that are beyond
the general interest
Bonus system

189

190
Amazon

191
Let’s look at how Amazon has scaled recruitment and training
Training
Retain Current
Employees
Train faster and
more efficiently
Increase the pool
of potential
candidates
Change
technology
Development
Programs
2-pizza team rule
Corporate startup
culture
Hire the right people
- Bar Raiser program
Standard programs
Coaching and
mentoring program
Opening Amazon
offices all around the
world
Second Head Office
project
Mobile hiring events
(Mobile Office)
Automate warehouse
work
Automate store work
(Amazon Go)
Amazon Lockers,
drones, self driving,
zeppelins
M&A of Zappos,
Twitch, Audible
Acqui-hiring of
startups
Outsource Logistics
Amazon Flex
Shifting work to
partners Amazon
Prep Centers
Flexible hours
Opportunities
coming form
constant growth

192
Retailers

193
Let’s have a look at what top retailers are doing
when it comes to scaling recruitment & training.

194
Let’s see how retailers have scaled recruitment and training
Training
Retain Current
Employees
Train faster and
more efficiently
Increase the pool
of potential
candidates
Change
technology
Mainly accept for
entry level
positions
High bonuses paid
after high season
Stress Internal
Promotions
Internal Training
Firms
Provide simple
supporting
materials
Balanced mixed of
new & experienced
Pay employees for
referring potential
candidates
Hire minorities
Offer part-time
opportunites
Mobile apps &
tools to increase
productivity
Replace employees
with software
Replace employees
with machine
M&A of
e-commerce firms
M&A of big data
firms
Temporary
employment
agencies
Employee leasing
Full outsourcing i.e.
maintenance
Shared Service
Centrers
Internal Academy
for future
managers
Online training and
mobile apps
Finance additional
education

195

196
Useful supporting techniques

197
Useful supporting techniques –
Introduction

198
In scaling 2 nice techniques can prove very useful: 10x using first
principals and Enabling Investment. We will discuss them in this section.

199
Reduce water using 10x
framework
Decrease cost using 10x
framework
10 x current solution using
first principals
Enabling Investments –
Examples
General concept

200
10 x current solution using first
principles

201
One of the ways in which you can come up with new business ideas is to use the 10x framework
where you resort to so called first principles. This is favorite method of Elon Musk.

202
There are 3 main ways in which you can improve existing business. This will
help you come up with the proper business idea
Improving existing
business
Make it faster Make it better Make it cheaper
Ikea
Dell
MacDonald
Uber
Apple

203
Let’s see how you can use this technique
Identify what you
want to improve
Identify the business
drivers of the
business
Estimate the impact
of the drivers on
your business
Select what and how
you would like to
change
Implement the
changes
 Think about
whether you want
your product,
service to be
cheaper, faster or
better
 Select one or up to
two features you
want to improve
 Learn what are the
drivers of your
business
 Identify how drivers
affect your business
and your results
 Prepare the
calculation in Excel
 See what has to
change in terms of
each and every
driver to achieve
the goal of 10x the
specific feature
(cost, speed,
customer
satisfaction)
 Choose a few
drivers that you
want to change to
make your product
cheaper, better or
faster
 Decide how you
would like to
change them
 Implement the
selected changes to
your business
 Remember to
monitor the
progress of changes
during and after the
implementation to
be sure that you
have achieved your
goal

204

205
In the next lectures we will have a look at 2 case studies
Reduce water consumption Decrease cost per 1 seat

206
framework – Case Introduction

207
Let’s imagine that you want to drastically reduce the
usage of water. Use the 10x framework to achieve this.

208
You don’t know what is your water
consumption currently
You want to estimate both direct
and indirect water consumption
Direct involves bathing, drinking
water, using water for cleaning
A few information about the problem
Indirect involves the usage of water
for producing products for you

209
Just as a reminder below the 10x framework that I recommend using
Identify what you
want to improve
drivers of the
business
Estimate the impact
of the drivers on
your business
Select what and how
you would like to
change
Implement the
changes
 Think about
whether you want
your product,
service to be
cheaper, faster or
better
two features you
want to improve
drivers of your
business
and your results
 Prepare the
 See what has to
change in terms of
each and every
driver to achieve
the goal of 10x the
specific feature
(cost, speed,
customer
satisfaction)
 Choose a few
drivers that you
want to change to
make your product
cheaper, better or
faster
 Decide how you
would like to
change them
 Implement the
selected changes to
your business
 Remember to
monitor the
progress of changes
implementation to
be sure that you
have achieved your
goal

210
framework – Drivers

211
Just as a reminder you want to drastically reduce the
usage of water. Use the 10x framework to achieve this

212
A few information about the situation

213
The general 10x framework using first principles looks like this
Identify what you
want to improve
drivers of the
business
Estimate the impact
of the drivers on
your business
Select what and how
you would like to
change
Implement the
changes
 Think about
whether you want
your business to be
cheaper, faster or
better
two features you
want to improve
drivers of your
business
and your results
 Prepare the
 See what has to
change in terms of
each and every
driver to achieve
the goal of 10x the
specific feature
(cost, speed,
customer
satisfaction)
 Choose a few
drivers that you
want to change to
make your business
cheaper, better or
faster
 Decide how you
would like to
change them
 Implement the
selected changes to
your business
 Remember to
monitor the
progress of changes
implementation to
be sure that you
have achieved your
goal

214
Let’s apply it to our case study
 We want to reduce
water consumption
expressed in liters
of water
 We will look at
direct and indirect
consumption
 The main drivers
affecting your water
consumptions are:
o Frequency of
consumption
o # of liters
consumed /
used per
consumption
 We will look at
drivers for different
categories: Bathing,
Drinking water,
Water used for
growing vegetables,
producing meat,
clothing, cleaning
dishes
Identify what you
want to improve
drivers of the
business
Estimate the impact
of the drivers on
your business
Select what and how
you would like to
change
Implement the
changes

215
Now let’s see what the water consumption depends on
Bathing
Drinking water
Water used for growing
vegetables
Total water
consumption
Water used for
producing meat
Water used for
producing clothing's
Water used for cleaning
the dishes
Other sources
+

216
# of times you take a
bath
Water usage per 1
bathing
x
Bathing
Drinking water
vegetables
Total water
consumption
Water used for
producing meat
Water used for
the dishes
Other sources
+

217
# of days
# of liters that you drink
per day
x
Bathing
Drinking water
vegetables
Total water
consumption
Water used for
producing meat
Water used for
the dishes
Other sources
+

218
# of days
Amount of vegetables
eaten per day
Water required to grow
1kg of vegetables
x
Bathing
Drinking water
vegetables
Total water
consumption
Water used for
producing meat
Water used for
the dishes
Other sources
+

219
# of days
Amount of meat eaten
per day
Water required to
produce 1 kg of meat
x
Bathing
Drinking water
vegetables
Total water
consumption
Water used for
producing meat
Water used for
the dishes
Other sources
+

220
# of pieces of clothing
bought a month
Water required to
produce 1 piece
x
Bathing
Drinking water
vegetables
Total water
consumption
Water used for
producing meat
Water used for
the dishes
Other sources
+

221
# cleanings per month
Water usage per 1
cleaning
x
Bathing
Drinking water
vegetables
Total water
consumption
Water used for
producing meat
Water used for
the dishes
Other sources
+

222
Let’s have a look at the following options
Currently
 You use water for all needed activities
 You don't make any changes to your behavior or habits
Description of the options
Option 1 – change of
frequencies
 You limit the frequency of performed activities
frequencies, mix
 You change your behavior by reducing the meat and increasing the vegetables consumption
frequencies, mix & method
 You change the bathing method by pouring less water into the bathtub or showering faster
frequencies, mix, method &
technology
 You use brand new technologies (i.e. meat grown artificially, atomizing shower system like Nebia)

223
framework – Summary

224
Just as a reminder you want to drastically reduce the
usage of water. Use the 10x framework to achieve this

225
A few information about the situation

226
We looked at 4 options that can help us get to the target
Currently
 You use water for all needed activities
 You don't make any changes to your behavior or habits
frequencies
frequencies, mix
technology
 You use brand new technologies (i.e. meat grown artificially, atomizing shower system like Nebia)

227
Identify what you
want to improve
drivers of the
business
Estimate the impact
of the drivers on
your business
Select what and how
you would like to
change
Implement the
changes
 Think about
whether you want
your business to be
cheaper, faster or
better
two features you
want to improve
drivers of your
business
and your results
 Prepare the
 See what has to
change in terms of
each and every
driver to achieve
the goal of 10x the
specific feature
(cost, speed,
customer
satisfaction)
 Choose a few
drivers that you
want to change to
make your business
cheaper, better or
faster
 Decide how you
would like to
change them
 Implement the
selected changes to
your business
 Remember to
monitor the
progress of changes
implementation to
be sure that you
have achieved your
goal

228
Let’s summarize what we have done
 We want to reduce
water consumption
expressed in liters
of water
 We will look at
direct and indirect
consumption
affecting your water
consumptions are:
o # of water liters
consumed
o Time of
consumption
o Frequency of
consumption
 We will look at
exact drivers for
different categories:
Bathing, Drinking
water, Water used
for growing
vegetables,
producing meat,
clothing, cleaning
dishes
Identify what you
want to improve
drivers of the
business
Estimate the impact
of the drivers on
your business
Select what and how
you would like to
change
Implement the
changes
 The biggest impact
comes from
reducing meat
consumption and
buying fewer
clothes
 We would
implement Option 3
 Option 4 requires in
most cases a
cheaper technology
 To get to 10x we
most likely have to
further reduce
certain activities

229
Let’s summarize what every option helps us achieve
77
30 28 23
9
Current water consumption Option 1 - change of
frequencies
Option 2 - change of
frequencies, mix
technology
Monthly water consumption
In thousands of liters

230
We can also look at the incremental impact of every option
77
47
2
5
14
9
Current water
consumption
frequencies
frequencies, mix
frequencies, mix &
method
frequencies, mix, method
& technology
Target water
consumption
Monthly water consumption and incremental reduction delivered by options

231
Let’s also look at the reduction by type of usage. The biggest impact is
from reducing the meat consumption and buying less clothes
5
0 2
42
19
1 0
68
Bathing Drinking Water Water Used for
growing vegetables
Water used for
producing meat
Water used for
producing clothing
Water for cleaning
the dishes
Other sources Total
Monthly reduction in water consumptions by type of usage

232
framework – Case Introduction

233
Let’s imagine that you are an owner of a bus company and you want to find
a way to make the cost per 1 seat cheaper. Use the 10x framework

234
They have 300 buses
Currently they use 1-floor diesel
buses
They want to dominate the
European market
To achieve that they need to lower
the cost per 1 seat

235
Identify what you
want to improve
drivers of the
business
Estimate the impact
of the drivers on
your business
Select what and how
you would like to
change
Implement the
changes
 Think about
whether you want
your business to be
cheaper, faster or
better
two features you
want to improve
drivers of your
business
and your results
 Prepare the
 See what has to
change in terms of
each and every
driver to achieve
the goal of 10x the
specific feature
(cost, speed,
customer
satisfaction)
 Choose a few
drivers that you
want to change to
make your business
cheaper, better or
faster
 Decide how you
would like to
change them
 Implement the
selected changes to
your business
 Remember to
monitor the
progress of changes
implementation to
be sure that you
have achieved your
goal

236
framework – Drivers

237
Just as a reminder you are an owner of a bus company and you want to
find a way to make the cost per 1 seat cheaper. Use the 10x framework

238
They have 300 buses
buses
European market
the cost per 1 seat

239
Identify what you
want to improve
drivers of the
business
Estimate the impact
of the drivers on
your business
Select what and how
you would like to
change
Implement the
changes
 Think about
whether you want
your business to be
cheaper, faster or
better
two features you
want to improve
drivers of your
business
and your results
 Prepare the
 See what has to
change in terms of
each and every
driver to achieve
the goal of 10x the
specific feature
(cost, speed,
customer
satisfaction)
 Choose a few
drivers that you
want to change to
make your business
cheaper, better or
faster
 Decide how you
would like to
change them
 Implement the
selected changes to
your business
 Remember to
monitor the
progress of changes
implementation to
be sure that you
have achieved your
goal

240
Let’s apply it to our case study
 You are the owner
of a bus company
that transports
people from city A
to B
 You want to lower
the cost per seat
10x
affecting your
business are:
o Number of
customers
o Cost per km /
hour
o Duration or the
distance of the
trip
 We will look at 4
main groups of
costs: driver costs,
fuel, maintenance
cost and leasing
cost
Identify what you
want to improve
drivers of the
business
Estimate the impact
of the drivers on
your business
Select what and how
you would like to
change
Implement the
changes

241
Profit from any trip will depend on 2 things: revenue and costs
Profit from the trip
Revenue from tickets
sales
Costs of the trip
-

242
Revenues will depend on 2 things as well: price of a ticket and number of seats
Revenue from tickets
sales
Costs of the trip
x
Price for 1 ticket
# of seats
(potential customers)
% Utilization
x

243
We have 4 main cost positions
Revenue from ticket
sales
Costs of the trip
- Cost of the driver
Cost of fuel
Cost of maintenance
Cost of leasing
+

244
Let’s have a look what the cost of the driver depends on
Revenue from ticket
sales
Costs of the trip
Cost of fuel
Cost of maintenance
Cost of leasing
+
Average salary per hour
# of drivers
# hours (duration of the
trip)
x

245
Let’s have a look what the cost of the fuel depends on
Revenue from ticket
sales
Costs of the trip
Cost of fuel
Cost of maintenance
Cost of leasing
+ Cost of fuel per 1 km
# km (trip length)
x

246
Let’s have a look what the cost of the maintenance depends on
Revenue from ticket
sales
Costs of the trip
Cost of fuel
Cost of maintenance
Cost of leasing
+
Average cost of
maintenance per 1 km
# km (trip length)
x

247
Let’s have a look what the cost of leasing depends on
Revenue from ticket
sales
Costs of the trip
Cost of fuel
Cost of maintenance
Cost of leasing
+
Purchasing price of the
bus
# of km that the bus will
be used
÷
# km (trip length)
x

248
In our drive to lower the costs 10x we will consider 3 scenarios
Currently
 For transporting people you use a standard, one-floor bus driven by gasoline
Option 1 – change bus model
 You change the bus model from one-floor to two-floor bus to increase the number of potential
customers
 Your bus still uses gas / petrol
and power supply
customers
 Your also switch to electric engine
Option 3 – change bus model,
power supply and self driving
customers
 The bus is self-driven

249
framework – Summary

250
Just as a reminder you are an owner of a bus company and you want to
find a way to make the cost per 1 seat cheaper. Use the 10x framework

251
They have 300 buses
buses
European market
the cost per 1 seat

252
In our drive to lower the costs 10x we considered 3 scenarios
Currently
 For transporting people you use a standard, one-floor bus driven by gasoline
customers
 Your bus still uses gas / petrol
and power supply
customers
Option 3 – change bus model,
power supply and self driving
customers
 The bus is self-driven

253
After we did the calculations in Excel we will do from the suggested
changes
 You are the owner
of a bus company
that transports
people from city A
to B
 You would like to
change your
business and make
it cheaper
affecting your
business are:
o Number of
customers
o Cost of fuel
o Cost of the
driver
o Cost of
maintenance
o Cost of
mortgage
 We have identified
3 options that help
us get closer to 10x
cheaper cost per
seat
 We will implement
option 2
 This will help us go
down from EUR 7.4
per seat to EUR 2.3
per seat
 Moving to self-
driving buses will be
done when the
technology is
available. This will
help us go down to
EUR 1.1 per seat
 In our case
implementing the
change would mean
ordering new buses
and slowly but
surely changing the
whole fleet
Identify what you
want to improve
drivers of the
business
Estimate the impact
of the drivers on
your business
Select what and how
you would like to
change
Implement the
changes

254
Let’s summarize what every option helps us achieve
7,4
4,2
2,3
1,1
Currently Option 1 - change bus model Option 2 - change bus model and
power supply
Option 3 - change bus model, power
supply and self driving
Cost pe 1 seat
In EUR per seat per average trip

255
Introduction

256
In many cases your demand is limited by something that you cannot control
directly. In this cases you may be interested in enabling investments

257
Enabling investments help you drive the demand or sales by removing
the main bottleneck – lack of the demand
1 2 3 4 5 6 7 8 9 10
Yours sales Market sales
Market sales and yours sales
In thousand

258
Enabling investment can be done in different places depending on
where the bottleneck is
Enabling Investments
Demand side Supply side Distribution side
Increase the demand from
current customers
Increase the number of potential
customers
Find new applications for your
products
Kill substitutes
Increase throughput of
bottlenecks
Increase the availability of
required resources and materials
Increase availability of potential
employees
Increase the throughput of the
distribution system
Create your own distribution –
existing channels
Create your own distribution –
new channels

259
In the next lectures we will have a look at 2 case studies
Retail chain for kids’ products Tesla

260
Examples

261
Let’s have a look how a retail chain for kids’ products can do
enabling investments to support the sales of its products

262
Let’s have a look how retail chain for kids products managed to apply
this strategy
Increased funding for programs
and services for expectant
families
Investments in businesses related
to children, e.g. kindergartens
Start selling your products to
older age groups
Develop care programs for
children whose parents work
professionally
Set-up recruitment and training
program for employees
Start cooperation with local
manufacturers
Automate warehouses and stores
Create new concepts to be able
to enter new regions
Expand into online and
marketplace
Create own vending chain or
lockers for parcels chains

263
Let’s have a look how Tesla was doing enabling
investments to support the sales of its cars

264
Let’s have a look how Tesla managed to apply this strategy
Convince governments and
regulators to support electric cars
usage
Develop infrastructure to
facilitate the use of electric cars,
e.g. supercharger network
Invest in solar production
capacity (Solar City, Powerwall,
Solar Roofs)
Provide car insurance for Tesla
cars
Build the cars from a scratch to
simplify it
Eliminate a large number of
intermediaries and create own
components for the car
Build own factory for batteries
Own retail chain to sell cars
Service centers combined with
sales centers
Tesla Rangers – mobile
technicians who can service
vehicles from your house
Automate the work in the
factories (fewer employees
needed)

265
$190
$19

266
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