Book Summary: The Grid By Matt Watkinson

Are you looking for a book summary of The Grid By Matt Watkinson? You have come to the right place.

Last week, I finished reading this book and jotted down some key insights from Matt Watkinson.

You don’t have to read the whole book if you don’t have time. This summary will provide you with an overview of everything you can learn from this book.

Without further ado, let’s get started.

In this The Grid: The Decision-Making Tool for Every Business summary, I’m going to cover the following topics:

What is The Grid By Matt Watkinson About?

Several factors are identified in the Grid that can make or break a business. With a holistic approach, this book will help you evaluate business ideas, anticipate the impact of your decisions, and take advantage of market changes. 

When you apply these principles in your own company, you will be able to identify the real causes of problems, rather than only treating their symptoms.

Who is the Author of The Grid By Matt Watkinson?

Matt Watkinson is a well-known business consultant around the world. 

His first book, The Ten Principles Behind Great Customer Experiences, won the 2014 Management Book of the Year Award from the Chartered Management Institute.

Who is The Grid By Matt Watkinson For?

The Grid By Matt Watkinson is not for everyone. If you are the following types of people, you may like the book:

  • Having a tough time as an entrepreneur
  • Managers looking for a new way to solve problems
  • Economics and business students

The Grid By Matt Watkinson Book Summary

Introduction

What are the chances that my business idea will succeed? Can I increase my business’ profitability? What is the impact of changes in my department on the rest of the company?

Entrepreneurs, managers, and department heads all ask themselves these questions every day. Their answers are highly specific to their own companies. What works for one company may not work for another.

What if there were a method that anyone could use at any time for their business?

Yes, there is! Discover what it is and how it can help you and your business.

Lesson 1: Business thrives when it is holistically managed

It’s possible to find important truths in unlikely situations if you’re open-minded and attentive. That’s what the author says. It was his chronic knee pain that taught him one of the most useful lessons about business in his life.

A number of specialists examined him, but none of them seemed to be able to eliminate his pain. This was because they were focusing on treating his symptoms and not the underlying causes. 

In the end, the author underwent surgery on both knees after months of pain. Despite these drastic measures, the author still experienced pain. He continued to suffer from painful knees.

He decided to try a different approach six months after the original surgery. He talked to physiotherapists and osteopaths, and he spent hours on foam rollers, but nothing helped. 

Then he met Nicole Parsons, a sports rehabilitation expert, just as he was about to give up and resign himself to a life of chronic pain.

Instead of just looking at the author’s knees, Parsons examined his entire body. The holistic approach revealed the real cause of the problem: a muscular imbalance between his shoulders and toes, which put excessive pressure on his knees.

Parsons discovered the true cause of the author’s problems and prescribed an effective treatment. 

Several months later, after strengthening the rest of his body, the author’s knees were no longer causing him pain, and he was able to resume jogging.

While this example is not directly related to holistic medicine, it is relevant when it comes to business. 

Until recently, there simply weren’t any coaches specializing in the business equivalent of Parson’s holistic approach to sports injuries. A lot of experts knew how to fix individual parts of a struggling business, but few thought about the whole picture.

It’s a shame, since businesses are successful when you solve problems by examining how different parts fit together and interact with one another. It’s time for struggling businesses to adopt a new approach. We’re going to show you how you can do exactly that in the following insights.

Ready? Great! Let’s learn about what the author calls The Grid – a comprehensive business analysis that identifies three objectives, three factors, and nine factors that all companies should consider.

Lesson 2: A successful business must be desirable, profitable, and long-lasting

Now let’s sketch the Grid. Let’s begin by setting our ultimate goals. There are many ways to describe them, but when it comes down to it, all businesses have three similar goals.

To begin with, every business must be desirable. To put it differently, if you want your company to succeed, you must attract customers.

The second factor is profitability. Customers must be interested enough in what you’re selling to pay an amount that will allow you to remain in business.

Finally, businesses must be long-lived. Two reasons underlie this. As your business grows older, you’ll generate more profit. Secondly, customers will trust you more if you’ve been around for awhile. 

On the other hand, it can be extremely difficult to convince people to buy your product when your company is very young.

The three objectives – desirability, profitability, and longevity – are interconnected. They are all interdependent. 

Unprofitable products, for example, are not sustainable. In contrast, if a product is not desirable, it won’t be profitable. Products that are neither profitable nor desirable won’t last.

The author worked with an upmarket wheelchair company a few years ago to see how this works in practice. The research conducted by this company suggested that there was a high demand for well-designed, sleek wheelchairs. 

Here is where the problem lies. Instead of focusing on all three goals, it focused on one quality – desirability. After searching for perfection, the company selected carbon fiber as its material of choice.

There was only one firm that produced the carbon fiber needed, however, so the wheelchair producer had no negotiating power and had to spend a great deal of money on materials. 

Consumers were then expected to pay the same amount for a wheelchair as they would for a small car. Since that wasn’t viable or profitable, the company went out of business.

Every step of your process must take into account these three goals. Three factors, however, need to be considered in order to accomplish this effectively. Next, we’ll see what those factors are.

Lesson 3: Businesses are unpredictable, and customers, markets, and your organization are always changing

Imagine yourself on board a ship at sea. You’re being pulled in one direction by the currents, and blown in another direction by the winds. 

These factors must be taken into account and adjusted accordingly in order for it to maintain its course. An efficient ship is one whose captain and crew know the currents and pay attention to the wind.

A company is like a ship in that it is buffeted by forces it cannot control, which it must learn to navigate. Customers, organizations, and the market are the three most important factors they must consider. All three are highly unpredictable.

Let’s begin with the customers. Their needs and desires constantly change. For example, a city might increase parking fees. The public no longer wants to own a car – they prefer renting vehicles by the minute or the hour.

Organizations are just as changeable as their strengths and weaknesses. Startups with five employees can quickly become small corporations with 100 employees. The start-up may have had less cash, but the larger organization will be much less flexible.

Then there is the market, which is notoriously fickle. Businesses can be confronted by new competitors or need to comply with new regulations at any time.

When these three factors are not addressed, catastrophic consequences can result. Volkswagen knows this all too well. The company admitted cheating on emissions tests using software in its diesel engines in 2015, causing an international scandal.

Why did Volkswagen cheat? During the early 2000s, they rejected the hybrid approach and developed “clean diesel” cars instead. The goal was to offer a combination of low emissions, high fuel efficiency, and high performance. 

Volkswagen realized in 2008 that its cars couldn’t meet American pollution standards and were therefore uncompetitive. The company’s directors concluded that cheating was the only way to avoid launching a noncompetitive product.

Massive fallout resulted. In order to restore Volkswagen’s reputation, the company created an emergency fund of $18 billion after the truth was revealed.

I think this is an excellent example of the importance of navigating change. Volkswagen did not consider the trend of increasing pollution standards when deciding to manufacture a clean diesel model. 

By cheating, they neglected their long-term reputation among customers and focused on short-term profits.

Lesson 4: A product’s desirability is determined by three factors

In this insight, we’re going to shift gears a bit and look more closely at what makes a company desirable. Three more elements will be added to our grid – wants and needs, rivalries, and offerings.

Let’s talk about wants and needs first. Customer values and beliefs generally determine what they want and need. They aren’t inflexible, though. The values and beliefs guiding customers constantly change.

Let’s look at the diamond industry. Diamond sales declined in the 1930s, and the entire jewelry industry struggled. De Beers launched an advertising campaign that suggested the size of the diamond a man gifted his darling would be a reflection of his love.

American’s perception of diamonds was transformed by the campaign. Diamonds became synonymous with eternal love. The concept spread to the wider world over time. 

In 1967, only 5 percent of men in Japan proposed with a diamond. That number increased to 60 percent by 1981!

A product’s desirability depends also on what alternatives its rivals in a given market offer. Often, alternatives become available when entry barriers – anything that prevents access to a market – change.

Consider Airbnb. In addition to owning or leasing property, hotels must pay staff and follow regulations. In contrast, Airbnb does not have any of these costs or compliance concerns. The company has been able to flood the market with cheaper – and therefore more desirable – housing by eliminating these entry barriers.

We now come to the third factor – the offerings. Your product will be desirable if your customers have a positive experience with it. To get there, you need to know what makes your customers tick.

Coca-Cola’s “Share a Coke” campaign replaced the brand’s usual logo with everyday names such as Dave and Sarah. What happened? The company sold 150 million bottles, generated 998 million impressions on Twitter, and sold 730,000 glass bottles in the United Kingdom alone.

This proves the importance of desirability. 

Lesson 5: To be profitable, you must increase revenues, preserve bargaining power, and reduce expenses

It’s time to think about profitability. In a similar fashion to desirability, we will also be adding three factors to the Grid.

Let’s talk about price first. The most effective way to boost your revenue is to raise the price of a given product. This is what McKinsey says. According to a 2010 study by the management consultancy firm, a 1 percent price hike led to an 11 percent increase in profits.

Imagine a candle business if that seems too abstract. A candle costs $8 to produce and $10 to sell, leaving the company with a $2 profit per candle. If the company sold one million candles at this price, it would earn $2 million.

Would the company’s prices rise if they began selling candles for $10.10 per unit? The company would make $100,000 more in profits. Its profits would only increase by $20,000 if it decided to increase its volume by 1 percent and sold 1,010,000 candles instead of 1,000,000. 

The reason is simple: as your volume increases, your material costs rise, so you have to make more to sell more. By comparison, if you raise your price, your material costs remain the same.

Bargaining power is the second factor. Apple is a good example of how it works. Apple Music was offered as a three-month free trial when it was introduced. Taylor Swift denied Apple’s request to release her album when it became apparent that musicians would not receive royalties during these three months.

Apple changed its policy within 24 hours. In order to preserve its bargaining power, Apple made Taylor Swift a powerful ally and protected its reputation.

We now come to the third and final factor – setting stringent targets to keep costs low.

Consider SpaceX, a rocket business. Tesla’s founder Elon Musk used detailed spreadsheets to estimate the lowest possible costs to maximize profit and signed off on every payment over $10,000 personally to keep their prices low.

This strict approach paid off, and the company met its $5,000 target for building a steering part for its rockets. This is compared to an initial estimate of $120,000 provided by a supplier!

Lesson 6: Stay adaptable, maintain your originality, and protect your customer base

Once we’ve covered desirability and profitability, we can move on to determining what determines the longevity of a company. Three new elements will be added to the grid – customer base, imitability, and adaptability.

Let’s begin with the customer base. It is a fundamental rule of business that a company cannot survive if its consumers do not know it exists. A company’s longevity depends on its awareness.

Marc Barros founded a company called Contour. Have you heard of it? I guess that’s the point. When Contour developed wearable cameras for action sports in 2004, it was one of two firms working on the project. The other firm was GoPro. 

Contour was obsessed with creating the best product, while GoPro focused on marketing. The former went bankrupt while the latter became a billion-dollar company.

Barros would later explain that this hard lesson taught him that “the best product doesn’t always win, but the product everyone knows about does.”

As a result, the longevity of a business can be dependent on its products – to a certain extent, at least. More original, or less imitable, a product is, the longer its producer will survive. 

However, that does not mean you should try to patent your product. It is usually more effective to protect your product through trade secrets.

Legal patents are expensive and expire after a few years. Trade secrets, on the other hand, are free and last forever. The best part is that nondisclosure agreements can enforce them. 

McLaren was fined over $100 million for sharing a Ferrari engineer’s trade secret with one of its main rivals. Ferrari successfully pursued claims in Italy and Britain against McLaren.

The third factor affecting longevity is adaptability – the ability to stay one step ahead of your competitors. In today’s world, where technology, regulations, and consumer preferences are constantly changing, this is especially important. Few products are timeless, and only the most innovative companies prosper.

Framestore, which produces visual effects for movies like Gravity, is a good example of one of these companies. It was founded in 1986 and has continuously pushed the envelope since. 

Therefore, it was able to move from visual effects into advertising, create motion-capture facilities, and become one of the first companies to open a virtual reality studio. 

As a result of staying abreast of technological developments, the company has been adaptable and has been able to increase its longevity.

Lesson 7: The Grid’s nine elements contribute to business success.

All companies should have three goals, three factors, and nine elements in common. You can’t treat these in isolation, as we said at the beginning. All elements affect each other.

Consider a situation in which a company has a brilliant idea for a new product, but fails to factor in the expertise of competitors. The danger is that the first company may develop a product that can be easily copied and even improved by a competitor. 

This occurs when companies think about their products only from the perspective of consumers and neglect to think about their competitors.

Imagine developing a product that does not exist on the market and does not meet customers’ wishes and needs. 

A good example of such a product is the carbon fiber wheelchair we discussed in an earlier insight. This business considered some elements of the Grid – rivalry and the market – but neglected others, such as customer needs.

Changing one element can lead to changes in other elements as well. When viewed in isolation, outsourcing may seem like a good idea – after all, it reduces costs and increases profits. 

On closer inspection, though, it quickly becomes clear that it can also reduce a firm’s bargaining power, which, in turn, makes it easier for rivals to gain market share.

The same thing happened to the computer company Dell. Dell outsourced much of its production to Asus, a Taiwanese supplier, in an effort to reduce costs. In the beginning, Asus produced motherboards, but it soon became Dell’s assembly supplier.

Dell reaped the immediate benefits of this move, but Asus then used its knowledge of Dell’s products to launch its own line of computers. By the time Dell saw Asus in the rear view mirror, it was too late – Taiwanese company had already surpassed its American rival. 

Outsourcing, therefore, made Dell imitable and reduced its bargaining power, which enabled a powerful rival to emerge.

Let’s now see how we can apply the Grid to a struggling business, now that we’ve introduced the Grid and identified its elements.

Lesson 8: You may need someone else to help you improve your business using the Grid

Recently the author was hired by a service company that was having financial troubles. In reviewing the firm’s data, he discovered some puzzling patterns. Customers were highly satisfied, but repeat purchases were low. 

Despite having a large number of potential customers, few of them committed to buying. Why was this happening?

This example taught the author a couple of things. The first lesson here is the most obvious: sometimes, you just need a fresh pair of eyes to identify improvements.

Consider the issue of low repeat purchases. As the author inquired around, he learned that the company offers only one-time projects and does not provide continuous support. 

No wonder customers weren’t returning – they weren’t invited back! Before the author noted this, no one realized this was a problem. The company noticed big returns when it implemented a biannual check-up service that developed ongoing relationships with customers.

In light of that, the second lesson is to not always trust your instincts, since issues often occur in unexpected ways. Let’s consider the revenue problem this company had. The conclusion that the company should raise awareness would have made intuitive sense. 

The result could have been expensive – and wasteful – marketing measures. It turned out that awareness wasn’t the real problem.

The author discovered that there was a large pool of potential customers – he just had to find a way of getting them to commit. This, in turn, suggested something was amiss with the customer experience.

The author found that the firm’s proposals to potential clients were extremely technical, inaccessible, and failed to demonstrate the benefits of the service. Therefore, he suggested that the firm improve its proposals so that they are less costly as well as more beneficial.

A struggling business can be turned around with the Grid!

Final Summary

Business success is determined by nine interdependent factors. This means you’ll have to take into account multiple perspectives when developing a company’s strategy. 

By considering your customer’s needs and wants, you should also consider the price of your product. 

In contrast, when it comes to development, you’ll have to think about how imitable your products are as well as what your competitors can offer. Make sure you cover all nine of these bases to ensure success.

Further Reading

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