Actions and Reactions

by Emily Jasper on March 22, 2011

Remember being in grade school, studying math or science, and you’d hear a classmate say, “When am I ever going to use this in real life?” Little did you know the basics of equations show up everywhere. Most of the time, it’s a pretty easy concept: Y=aX+b. But then again, taking into account multiple variables can really be tricky.

We’re conducting marketing simulations right now, and we make decisions about price, costs, and time management over 12 quarters. We’re currently in practice mode, so the first few times I ran the simulation, I just started changing things to see what would happen. A little discount here, modify spending there, and voila! I lost a ton of money…

When I really started playing, actually making sound business decisions, there were reactions that I hadn’t expected. For example, I had to pick how much time my sales team would focus on large vs. small customers. If I change the numbers one direction, one group wasn’t happy, but if I changed them the other direction, then both groups weren’t happy. What? Is one group always going to be dissatisfied?

Then I realized that this one number may be impacted by another decision I make in the simulation…as all the numbers are affected by each other. There’s a reason they want you to learn about multivariate regression: we have a huge number of variables that affect every business decision.

What gets confusing, however, is when you are the variable. A whole multitude of things could be happening around you, and the effects of those decisions begin to affect you. An obvious example: the economy tanks, your company loses money, layoffs are required, and you lose your job. You could have had the best job performance as an individual, but you may be subject to a lot of other variables outside of your control.

While my simulation may have a ton of background algorithms running to project revenue, we don’t have that in real life. We have to think about variables ourselves, and then do our best to prepare for results over which we have no control.

Yep, we must give up a little bit of that control because it isn’t in our hands. Then think of what else you can spend time doing when it is in your control.

Have you experienced times when if feels like there are just too many things affecting one result? What is an instance when you felt like the variable?

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