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An empty bottle of wine

An Italian friend of mine used to quote what he claimed was an ancient Italian proverb, something to the effect of "You can't have an empty bottle of wine and a sober grandmother."

He was making the point that one thing usually leads to another, and if one item is present you can be sure that another will also be there. If the bottle of wine is unopened then grandma could be sober, but if the bottle of wine is empty you can also be sure that grandma is drunk.

(I am not sure why grandma figures in this proverb, as opposed to Uncle Antonio or second cousin Lucas, but there you are).

In science, a similar idea may be found when exploring the rule of "Degrees of Freedom". This scientific concept helps to explain the number of parameters that can vary independently. As soon as you fix one parameter, it then sets some form of limit or control on the other variables, fixing some but letting others continue to vary. Eventually everything gets fixed.

As an example, let's think of a dating site. You start by putting in "man looking for woman" or "man looking for man" (or "woman looking for man" or "woman looking for woman"). Automatically you reduce the number of profiles you are shown. You can then reduce this further by specifying age, height/weight, education … each variable you fix reduces the number of potential partners until, theoretically at least, you are given the one person you can reasonably expect to spend the rest of your life with.

Or, as another example, let's say you are considering what form of government you wish. Once you choose "democracy" then you limit yourself to majority rule and free elections. You can certainly choose another form of government which does not rely on majority rule (for example, China today) but that would not be defined as a democracy.

Bear with me a minute as I get mathematical. Let's say you want to graduate university and you still have five courses left to take. Statisticians would say that you have "4 degrees of freedom". At first you can choose any of the five courses to take, then after you have taken one you have four courses left (and three degrees of freedom) until eventually you have only one course left to take. At that point you have zero degrees of freedom, because you have no choice but to take that last remaining course. All other options have been taken away from you.

So every time you make a choice in life, you narrow your future choices. Marry this woman and you cannot marry another, study engineering and it is probable you will not become a fireman.

Businesspeople must deal with, and effectively use, this concept every day. Let's say you are in marketing. You have a marketing budget. The moment you spend something, that restricts your ability to do something else. If your marketing budget is Bt10 million, and a TV campaign costs Bt8 million, and you just spent Bt5 million on Facebook advertising, then you have eliminated the possibility of doing TV.

Or if you are in manufacturing, producing cars for example, if you set fuel consumption maximums then you limit the size of the engine you can include.

Pretty simple stuff, isn't it? The theory explains why most young people are idealistic. They have not yet made life choices, so they feel they can do anything and they "want it all". As one progresses in life, one makes choices that define and narrow future possibilities. This continues until one is an old person and has very little flexibility left.

Now, since this is supposed to be a column on strategy, how do we use this concept to build a better business? Successful companies understand that their products or services must be designed with a specific target customer in mind. Defining a target may potentially reduce the opportunity (if you choose women for your target you are eliminating half the potential user base), but by restricting things you can also sharpen your plans. Choosing women instead of men helps clarify your marketing approach, for example, or reduces the amount of features you need to include. Sharpening further by choosing young or teenage women, for example, reduces your degrees of freedom but actually helps to clarify and simplify what you need to do. Taken to the extreme, if the target audience for your product or service is, for example, your wife (or husband) you would know exactly what features to include, how much to price, and how to market ("Honey, I have this great product for you").

The lesson here is to use the concept of degrees of freedom to your advantage. By clarifying and restricting your objectives, you can make them more efficient and effective.

Just remember not to leave the bottle of wine when grandma is home alone.

Eric Rosenkranz is chairman and founder of e.three (www.ethree-asia.com), a strategic advisory helping companies in Southeast Asia develop growth-oriented

strategies.


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