What A Cow can Tell us About Profits

cow smoking a cigar in business attire sitting on a fence

We have a saying in Russia.. how do you make a cow produce more milk and consume less grain?   You feed it less food and you milk it more often.. that’s McKinsey in a nutshell..”

So began our dinner conversation at a Cybersecurity Mastermind last night. Our friend at the table continued..

“We have a friend who built a sizable business across Russia over 25 years and eventually divested 51% of the business to a new set of investors for the equivalent of $50 million.

“The investors wanted to move away from the “old approaches” and so hired a McKinsey team to come in and make recommendations.

“The recommendations focused on creating higher profit margins by cutting costs..”

“Close this warehouse here.. change the terms on that supplier there..   get rid of all these people over there…”

“So the company increased its margins immediately but then over the next 18 months proceeded to implode and lose over 70% of its business.

“The investors came back to our friend, admitted their mistakes, and begged him to buy back thir shares which he proceeded to do for $5 million…

“And then over the next 18 months, he threw out McKinsey, brought back his common sense principles and proceeded to restore the business 100%! So when all was said and done he effectively got paid $45 million to step back for 18 months…”

Besides a good laugh at McKinsey’s expense (personally I don’t have much sympathy for how they were in bed with the Sacklers to addict and fatally overdose hundreds of thousands of people), this story reinforced how profits are important but not at the expense of common sense or carving out the guts of your own business.

Are you fine-tuning your business like a well-nurtured herd, or are you stuck trying to milk a bull?

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