Why Brevity of Information is Important for Steering a Business – Part 2
The Cost of Information Overload
When business leaders are overwhelmed with too much information, the consequences can be detrimental:
- Analysis Paralysis: Excessive data can lead to overthinking, delaying important decisions.
- Loss of Focus: Key priorities can be overshadowed by irrelevant details.
- Inefficiency: Sifting through unnecessary information wastes time and resources.
How to Practice Brevity in Business
The concept of Contribution Margin
- The concept of contribution margin is much more important than any other profitability measure. It can be defined as net sales (after discounts, commissions) less all variable costs associated with that product or product line. The focus on contribution margins is essential to manage product mix through economic cycles and product life stages.
Identify Key Metrics
- Determine which data points are most relevant to your strategic goals. For instance, a retail business might prioritize contribution margin, inventory turnover, sales growth, and customer satisfaction.
Use Visual Dashboards
- Implement tools like dashboards to visualize data succinctly. Graphs, heatmaps, and scorecards can present complex data in an easily interpretable format.
Prioritize Regular Updates
- Deliver updates in a structured, consistent format. For example, a weekly one-page summary of financial performance helps decision-makers stay informed without unnecessary detail.
Leverage Technology
o Use software and automation to filter, analyze, and present only the most relevant information. We think the knowledge of data analytics is a necessity.
The Brevity Principle Adapted to Small and Medium Businesses
For SMEs, the application of the principle of brevity needs to be adjusted slightly. SMEs are a lot smaller in comparison to Mr. Dhirubhai Ambani’s Reliance Industries (please see Part 1). Secondly, they do not have many managers working for them.
What We Recommend to Our Clients
- A customized one-page report. The main idea is one page or less. The frequency can be weekly, monthly or quarterly.
- Up to 10 key metrics. We recommend more than 2 key metrics because SMEs are entrepreneurs. The priorities keep shifting in the startup and growth phase.
- 3 layers of key metrics. For example, sales growth trend at level 1, contribution margin per unit of product at level 2. These are essentially customized.
- Align with Business Model Canvas. Key metrics are aligned with different segments of the BMC.
- Easier to delegate. The CEO or president can delegate the responsibility for each key metric to a manager.
Ready to Act?
Brevity isn’t just a practice; it’s a strategic advantage. If you’re struggling with information overload or need help identifying the most critical metrics for your business, we can help. We offer 15-minute free consultation.
Contact us today:
Email sanjay@sankulinc.com or call 647 297 7025
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