The Gap Test: How to Determine If You Should Simplify Your Business

simplifyGo for the gap — and do the opposite from the market leader before anyone else does.

Business strategy — especially when it involves case studies from business schools — is always written with the benefit of hindsight and often with a very broad brush. It’s like the plot of an old-fashioned thriller in which the good guys and the bad guys are sharply defined: the good guys always get stuck in terrible fixes, but they know what they’re doing and somehow emerge victorious as the story races to its climax.

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What Do They Mean By Non-routine Business Decisions?

QuestionDecisions not typically faced in the course of normal day-to-day operations. Examples might include the decision to discontinue a product line, the acceptance of a special customer order or the decision to make or buy a component part needed for a manufactured product. In making good non-routine business decisions, it is critical for management to identify and consider relevant revenues and costs and ignore information that should not impact the decision. The only relevant revenues and costs are future revenues and costs that vary among the decision alternatives, or in other words, future revenues and costs that differentiate the decision options. In addition to the quantitative analysis involved in business decision-making, qualitative factors must also be considered. This means that regardless of the financial impact, some choices are made to accomplish non-financial objectives. For example, a profitable business may be sold to a family relative at a price below its fair market value in order to accomplish some family objective.