All in business understanding

When we look at cost curves, often we notice they have a U shape which is the result of two opposite effects on the same driver. For example, the quality cost curve and the logistic cost curve.

Quality Cost Curve

If we put the quality level on the x-axis, from 100% defect to 100% perfect, say 1 to 10 in terms of quality level, the cost of achieving the different quality levels increases as we approach perfection. Something like this:

A company goes through some good times and some bad times. And sometimes it even has to march through the Death Valley (expression from Andy Grove). 

Cost cutting is something which usually comes up during the bad times and is seen as a necessary evil the company has to go through. It's a fuzzy term for a lot of different things generally perceived as a negative thing. So let's get to the bottom of it.

We tend to believe that the more we know, the more we will understand. We want more facts, more details, more numbers, more of whatever that would make us smarter. But what really makes us smarter is thinking and thinking is hard. Seeking data is easier than thinking, so we tend to go that way.

I used to be a big supporter of the idea that the more information I have at hand, the better I will understand how things come together. And so I dig in, get the data and figure out how that number became what it became. At this point I have already the first issue.