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The Two Valleys Company 303
Demand
Fixed costs
Var. costs
p(contract)
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0
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Profit $m
Figure 11.4 – Tornado diagram for Callum Falls
analysis. If it has, or if the choice between the options is not clear, then this
option may actually offer better opportunities if imaginative strategies
can be designed to reduce risks and enhance returns. Figure 11.4 shows
a tornado diagram for Callum Falls.
As expected, Callum Falls, with its much larger capacity but higher
fixed costs, would only be worth considering if a strategy could be
designed to make a high level of demand very likely, otherwise its profit
will probably be below that which could be achieved at Littleton. At
this stage, it would probably be a good idea to keep Callum Falls ‘in the
frame’ to see if a feasible ‘high demand’ strategy can be designed.
Using brainstorming to create actions to improve
the preferred policy
Creative thinking can be used by the management team to produce
actions that will potentially reduce the risk and identify opportunities.
Brainstorming is one technique that can enhance creativity. Other techniques
for generating ideas include lateral thinking, 4 synectics, checklists
andforcedrelationships. 5 Brainstorming was developed in the 1930s
and is usually regarded as a method to be used with groups of people.
Although it can be employed by individuals, the benefit of involving a
group is that one person’s ideas can help to stimulate even more ideas
by other group members.
Underlying brainstorming is the idea that people’s creativity is
restricted because they tend to reject ideas at too early a stage. This
may be because they impose imaginary constraints on a problem or
make false assumptions. Alternatively, they may be unable to see a
problem from multiple perspectives or they stereotype problems and
possible solutions and hence fail to see their wider potential. For example,
negotiations with a customer may be seen as a financial issue. Viewing it
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