All of us dread that meeting where the boss asks “why is revenue down?” The only thing worse than that question is not having any answers! There are many changes happening in your business every day, and often you will want to understand exactly what is driving a given change – especially if it is unexpected.
Understanding the underlying causes of change is known as root cause analysis. The root cause is the action or event that eventually results in the change. Note that the root cause may not make the change itself, it may trigger a series of other events which culminate in the change. There may, of course, be more than one root cause of a given change.
For example, let’s say we run a large chain of retail stores named Sean’s Snowshoes. If our revenue has dipped, it could have been for any one of the following reasons:
- The competition lowered their prices, resulting in fewer sales for us.
- A massive snowstorm has kept our customers at home and not in our stores.
- One of our major marketing campaigns ended.
- We changed our coupon strategy which confused customers.
…. Or one of dozens of other potential causes!
As you can imagine, root cause analysis can be complex and challenging. This week we’ll cover a series of techniques and tools that will help you navigate these difficult waters.
Tomorrow we get started in helping Sean’s Snowshoes with their root cause analysis by identifying all the contributing factors we need to consider.
Quote of the Day: “Shallow men believe in luck or in circumstance. Strong men believe in cause and effect.” ― Ralph Waldo Emerson