Quick Summary: The Grid identifies several factors that can determine the success or failure of a business. With a holistic approach, this book will help you evaluate business ideas, anticipate the impact of your decisions, and profit from market changes.
By applying these principles to your own business, you will be able to identify the true causes of problems rather than just treating their symptoms.
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:
The Grid By Matt Watkinson Book Summary
Lesson 1: Business thrives when it is holistically managed
If you’re open-minded and attentive, you can discover important truths in unlikely places. According to the author. His chronic knee pain taught him one of the most important business lessons of his life.
Several specialists examined him, but none seemed to be able to relieve his pain. This was due to their focus on treating his symptoms rather than the underlying causes.
After months of pain, the author underwent surgery on both knees. Despite these drastic measures, the author felt pain. He was still experiencing knee pain.
Six months after the initial surgery, he decided to try a different approach. He saw physiotherapists and osteopaths and spent hours on foam rollers, but nothing worked.
Then, just as he was about to give up and resign himself to a life of chronic pain, he met Nicole Parsons, a sports rehabilitation expert.
Parsons examined the author’s entire body rather than just his knees. The holistic approach revealed the true source of the problem: a muscular imbalance between his shoulders and toes, which put undue strain on his knees.
Parsons identified the root cause of the author’s problems and recommended an effective treatment.
After several months of strengthening the rest of his body, the author’s knees no longer hurt and he was able to resume jogging.
While this example does not directly relate to holistic medicine, it is relevant in the business world.
There simply weren’t any coaches specializing in the business equivalent of Parson’s holistic approach to sports injuries until recently. Many experts knew how to fix individual parts of a failing business, but few considered the big picture.
Lesson 2: A successful business must be desirable, profitable, and long-lasting
Let’s draw the Grid now. Let us begin by defining our ultimate objectives. There are numerous ways to describe them, but when it comes down to it, all businesses share three common objectives.
To begin, every business must be appealing. To put it another way, if you want your business to thrive, you must attract customers.
The second consideration is profitability. Customers must be interested in what you’re selling enough to pay a price that allows you to stay in business.
Finally, companies must be long-lasting. This is due to two factors. As your business grows older, you’ll generate more profit. Second, customers will have more faith in you if you’ve been in business for a while.
On the other hand, it can be extremely difficult to convince people to buy your product when your company is very young.
The three goals – desirability, profitability, and longevity – are inextricably linked. They are all interconnected.
Products that are not profitable, for example, are not sustainable. In contrast, if a product is unappealing, it will not be profitable. Products that are neither profitable nor desirable will not be around for long.
A few years ago, the author worked with an upscale wheelchair company to see how this works in practice. According to this company’s research, there is a high demand for well-designed, sleek wheelchairs.
This is where the issue arises. Instead of concentrating on all three objectives, it concentrated on one quality – desirability. After searching for perfection, the company selected carbon fiber as its material of choice.
However, because only one company produced the necessary carbon fiber, the wheelchair manufacturer had no negotiating power and had to spend a significant amount of money on materials.
Customers were expected to pay the same price for a wheelchair as they would for a small car. The company went out of business because that was not viable or profitable.
Lesson 3: Businesses are unpredictable, and customers, markets, and your organization are always changing
Consider yourself on a ship at sea. The currents are pulling you in one direction, while the winds are blowing you in another.
These factors must be considered and adjusted accordingly in order for it to stay on track. A ship that is efficient is one whose captain and crew understand the currents and pay attention to the wind.
A company, like a ship, is buffeted by forces it cannot control and must learn to navigate. The three most important factors they must consider are customers, organizations, and the market. All three are extremely volatile.
Let’s start with the clients. Their wants and needs are constantly shifting. A city, for example, may raise parking fees. The general public no longer wants to own a car; instead, they prefer to rent vehicles by the minute or hour.
Organizations change as much as their strengths and weaknesses. Startups of five people can quickly grow into small corporations of 100 people. Although the start-up had less capital, the larger organization will be much less adaptable.
Then there is the market, which is notoriously fickle. At any time, businesses may face new competitors or be required to comply with new regulations.
When these three factors are ignored, disastrous consequences can occur. Volkswagen knows this all too well. In 2015, the company admitted to cheating on emissions tests with software in its diesel engines, sparking an international scandal.
Why did Volkswagen defraud? They rejected the hybrid approach in the early 2000s and instead developed “clean diesel” cars. The goal was to provide a high-performance vehicle with low emissions and high fuel efficiency.
Volkswagen recognized in 2008 that its vehicles could not meet American pollution standards, rendering them uncompetitive. The directors of the company came to the conclusion that cheating was the only way to avoid launching a noncompetitive product.
The result was massive fallout. After the truth was revealed, Volkswagen established an emergency fund of $18 billion to repair its reputation.
This, I believe, is an excellent example of the significance of navigating change. Volkswagen did not take the rising pollution standards into account when developing a clean diesel model.
By cheating, they ignored their long-term customer reputation in favor of short-term profits.
Lesson 4: A product’s desirability is determined by three factors
What customers want and need is generally determined by their values and beliefs. They are not, however, rigid. Customers’ values and beliefs are constantly changing.
Consider the diamond industry. Diamond sales fell in the 1930s, and the jewelry industry as a whole struggled. De Beers launched an advertising campaign implying that the size of the diamond a man gives his darling reflects his love.
The campaign changed Americans’ perceptions of diamonds. Diamonds became associated with everlasting love. Over time, the concept spread to the rest of the world.
Only 5% of men in Japan proposed with a diamond in 1967. By 1981, that figure had risen to 60%!
The desirability of a product is also determined by the alternatives offered by its competitors in a given market. When entry barriers – anything that prevents access to a market – change, alternatives frequently become available.
Take, for example, Airbnb. Hotels must pay employees and adhere to regulations in addition to owning or leasing property. Airbnb, on the other hand, has none of these costs or compliance concerns. By removing these entry barriers, the company has been able to flood the market with cheaper – and thus more desirable – housing.
We’ve arrived at the third factor: the offerings. If your customers have a positive experience with your product, it will be desirable. To get there, you must first understand what motivates your customers.
Coca-“Share Cola’s a Coke” campaign replaced the brand’s traditional logo with common names like Dave and Sarah. What occurred? The company sold 150 million bottles, generated 998 million Twitter impressions, and sold 730,000 glass bottles in just the United Kingdom.
This demonstrates the significance of desirability.
Lesson 5: To be profitable, you must increase revenues, preserve bargaining power, and reduce expenses
Raising the price of a product is the most effective way to increase revenue. According to McKinsey. According to a 2010 study by the management consulting firm, a 1% price increase resulted in an 11% increase in profits.
If that seems too abstract, consider starting a candle business. A candle costs $8 to make and $10 to sell, resulting in a $2 profit per candle for the company. The company would earn $2 million if it sold one million candles at this price.
Would the company’s prices rise if it started selling candles for $10.10 each? Profits for the company would increase by $100,000. If it decided to increase its volume by 1% and sell 1,010,000 candles instead of 1,000,000, its profits would only increase by $20,000.
The reason is simple: as your volume grows, your material costs rise, forcing you to produce more in order to sell more. In comparison, raising your price has no effect on your material costs.
The second factor is bargaining power. Apple is an excellent example of how it works. When Apple Music first became available, it was offered as a three-month free trial. Taylor Swift turned down Apple’s request to release her album after it became clear that musicians would not be paid royalties for the next three months.
Apple’s policy was changed within 24 hours. To maintain its bargaining power, Apple made Taylor Swift a powerful ally and safeguarded its reputation.
The third and final factor is to set stringent targets to keep costs low.
Consider the rocket company SpaceX. Elon Musk, Tesla’s founder, used detailed spreadsheets to estimate the lowest possible costs to maximize profit and personally signed off on every payment over $10,000 to keep their prices low.
This stern approach paid off, and the company met its $5,000 goal for developing a steering component for its rockets. This is in comparison to a supplier’s initial estimate of $120,000!
Lesson 6: Stay adaptable, maintain your originality, and protect your customer base
After we’ve covered desirability and profitability, we can look at what factors influence a company’s longevity. The grid will be expanded with three new elements: customer base, imitability, and adaptability.
Let’s start with the clientele. It is a basic business rule that a company cannot survive if its customers are unaware that it exists. The awareness of a company determines its longevity.
Contour is a company founded by Marc Barros. Have you heard anything about it? That, I suppose, is the point. Contour was one of two companies working on wearable cameras for action sports back in 2004. GoPro was the other company.
Contour was obsessed with making the best product possible, whereas GoPro was obsessed with marketing. The former went bankrupt, while the latter grew into a multibillion-dollar corporation.
This difficult lesson taught Barros that “the best product doesn’t always win, but the product everyone knows about does.”
As a result, to some extent, the longevity of a business can be dependent on its products. The more unique, or less imitable, a product is, the longer its manufacturer will survive.
That is not to say you should try to patent your product. Protecting your product through trade secrets is usually more effective.
Legal patents are costly and only last a few years. Trade secrets, on the other hand, are free and will last in perpetuity. The best part is that nondisclosure agreements are legally binding.
McLaren was fined more than $100 million for disclosing a Ferrari engineer’s trade secret to one of its main competitors. Ferrari successfully sued McLaren in Italy and the United Kingdom.
The ability to stay one step ahead of your competitors is the third factor influencing longevity. This is especially important in today’s world, where technology, regulations, and consumer preferences are constantly changing. Few products last forever, and only the most innovative businesses thrive.
One of these companies is Framestore, which creates visual effects for films such as Gravity. It was founded in 1986 and has been pushing the boundaries ever since.
As a result, it was able to transition from visual effects to advertising, establish motion-capture facilities, and open one of the first virtual reality studios.
As a result of staying current on technological developments, the company has become more adaptable and has increased its longevity.
Lesson 7: The Grid’s nine elements contribute to business success
All businesses should share three goals, three factors, and nine elements. As we stated at the outset, you cannot treat these in isolation. All elements interact with one another.
Consider the following scenario: a company has a brilliant idea for a new product but fails to consider the expertise of competitors. The risk is that the first company will create a product that a competitor will easily copy and even improve.
This happens when businesses only consider their products from the perspective of their customers and fail to consider their competitors.
Consider developing a product that does not currently exist on the market and does not meet the desires and needs of customers.
The carbon fiber wheelchair we discussed in an earlier insight is an example of such a product. This company considered some Grid elements, such as competition and the market, but ignored others, such as customer needs.
Changing one element can cause changes in other elements. Outsourcing may appear to be a good idea when viewed in isolation; after all, it reduces costs and increases profits.
Closer examination reveals, however, that it can also reduce a firm’s bargaining power, making it easier for rivals to gain market share.
The same thing happened to computer manufacturer Dell. In an effort to cut costs, Dell outsourced much of its production to Asus, a Taiwanese supplier. Asus began by producing motherboards, but it quickly became Dell’s assembly supplier.
Dell reaped the immediate benefits of this move, but Asus went on to launch its own line of computers based on its knowledge of Dell’s products. When Dell noticed Asus in the rearview mirror, it was too late: the Taiwanese firm had already surpassed its American rival.
As a result of outsourcing, Dell became more malleable and had less bargaining power, allowing a powerful rival to emerge.
Now that we’ve introduced the Grid and identified its components, let’s see how we can apply it to a struggling business.
Lesson 8: You may need someone else to help you improve your business using the Grid
The author was recently hired by a service company that was experiencing financial difficulties. He discovered some perplexing patterns while reviewing the firm’s data. Customers were extremely pleased, but repeat purchases were low.
Despite having a large number of potential customers, only a small percentage of them committed to purchasing. What was the cause of this?
The author learned a few things from this example. The first lesson is the most obvious: sometimes all you need is a fresh pair of eyes to spot flaws.
Consider the low rate of repeat purchases. As the author inquired, he discovered that the company only offers one-time projects and does not provide ongoing support.
Customers didn’t return because they weren’t invited back! No one realized there was a problem until the author pointed it out. When the company implemented a biannual check-up service that developed ongoing relationships with customers, it saw significant returns.
In light of this, the second lesson is to not always trust your instincts, as problems frequently arise in unexpected ways. Consider the revenue issue that this company was experiencing. It would have made intuitive sense for the company to raise awareness.
About The Author
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.
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