Supply and Demand in Business

“A supply engine shouldn’t be more sophisticated than the [corresponding] demand engine.”

—Sanjay Menon

Why is this the case? It’s because if you have a demand generation engine that’s selling A, B, and C — and then you attempt to fulfill it with a supply engine that doesn’t deliver A, B, and C and instead it delivers x, y, w, j, and k … then you’re in trouble.

How does this happen? It happens with product and services companies all the time where demand isn’t a consideration, and we tend to make interesting and “perfect” (idealized) offerings that go to market with nobody wanting them.

What makes it worse? Things get worse when you allow the demand engine to take *anything* it wants into consideration. In that case, the supply engine needs to cover a wider range of possibilities that it wasn’t designed to serve.

When does it work? The silverlining can happen, as in the first para example of delivering x, y, w, j, and k when having full knowledge that a combination of two x’s and one w can deliver an A, three j’s can deliver a B, and etc. In other words, if you have the right components that can be assembled into other things that are in demand — even ones you weren’t planning on needing to serve up as supply — then you’re in business.

This isn’t anything earth-shattering of course. But it came to mind as especially valid when Sanjay shared this super concise thought that abs blew me way. —JM

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