Bill Canady argues companies waste time in "theater" without stopping initiatives. He identifies "Quad 4" customers: low-margin accounts that consume up to 20% of capacity for just 4% of revenue. The fix is calculating whether the freed capacity is worth more than keeping their zero-margin business.
The test is simple and it's a count. How many things have you actually stopped? If the answer is zero, you're running theater, no matter how good the analysis is. And the analysis is usually excellent, and that's what makes it convincing. All right, 3 things worth keeping. Number one, Quad 4 is a B customer buying B products, buying the tail products, and it's where profit goes to die. It may be 4% of revenue, but it's somewhere between 20% and 4% of capacity. When someone says, but there's still $4 more dollars of revenue, $4 million more dollars of revenue, you answer with the margin after cost to serve, the capacity number next to the revenue number, and the reframe: what would we do with a third of our capacity back, and what is it worth? Is it more than the $4 million at zero margin?
