The experiment already run

The decision as it arrived

The client was the operating partner at the private equity firm that owned the business, and he had already put the number in front of his own investors.

A $180m distributor of industrial valves and safety equipment, selling to construction contractors out of 22 branches. The branches cost $14m a year. The board had agreed to close six and move the savings into digital ordering, a $28m line growing at 30%. The CEO had built the plan and it was sound on its own terms. Three weeks before the vote he called Ammentic, because he wanted the plan tested by people who did not work for him.

The Read

Ammara looks for the experiment a company has already run without noticing.

Eighteen months earlier this one had closed two branches for reasons unrelated to strategy. A lease ended and a manager retired. Ammara pulled the revenue in those two territories for the year that followed and set the digital orders beside it. The company kept 61% of the revenue. Digital orders there fell 11% while digital grew 30% everywhere else.

One more fact came from the order records. Eight of the ten largest digital accounts had placed their first digital order within 60 days of buying at a branch counter. The plan assumed the company would keep 85%.

The Pressure Test

Both operators backed the plan when they read it.

The first had closed a third of a distribution network, and the revenue had come back through the branches that stayed. The 60-day fact moved her. In her business the counter took the order. Here it was where a contractor learned that the staff knew his job. Digital was not winning customers. It was converting the ones the branches had already earned, and a closed branch stops producing them a year before the numbers show it.

The second did not move. The $14m was real, she said, and a business carrying that cost sells for less whatever its growth rate does. Right closures, wrong sequence.

Then they costed both readings. Six branches release $5m a year. The room put the other side at $15m, the difference in price between a distributor growing at 30% and one growing at 18%, which is where digital lands if six more territories behave like the first two.

The Action Brief

Change it. The savings were real and the order was wrong.

Close two of the six, in the territories where digital is smallest, and hold the other four for a year. Use that year to build what the counter does: a named person who knows the largest contractors in each territory, and stock they can collect the same morning. Then close the next branch when 12-month retention beats 61%.

One condition he could not route around. The savings he promised his investors arrive a year late, and the place to say so is now, while the plan is still a plan.

The plan treated the branches as a cost. The digital line had been living off them.

Where it landed

At the debrief he said they closed two and held four. Retention came in at 71%, above the precedent and short of the plan, and he went back to his investors twice. The CEO held his position into the second quarter, until the retention number moved him.

The company had run the experiment 18 months earlier without noticing. Ammara found it, and the room said what it was worth.