occams-razor

The Occam’s Razor In A Nutshell

Occam’s Razor states that one should not increase (beyond reason) the number of entities required to explain anything. All things being equal, the simplest solution is often the best one. The principle is attributed to 14th-century English theologian William of Ockham.

Understanding Occam’s Razor

Occam’s Razor is a principle that states that one should not increase (beyond reason) the number of entities required to explain anything. In other words, with all things being equal, the simplest solution is often the best one. The principle is attributed to 14th-century English theologian William of Ockham.

It’s important to realize that Occam’s Razor is not 100% reliable. That is, the simplest solution is not always the correct solution. But when a business is presented with several solutions to a problem, its best course of action is to choose the solution with the fewest assumptions.

In business, companies spend vast amounts of time and money recruiting new customers and retaining them as loyal followers. Consumers themselves are bombarded with messages daily and are easily distracted by social media and other sources of cognitive overload. While complex marketing strategies may be somewhat effective in attracting customers, far simpler solutions help businesses retain them. 

Here, the simplest solution for the business is to focus on:

  1. Product quality. Many businesses equate the number of features with the value of a product. But they do not ask the customer what they value beforehand. Products with too many features distract a consumer and reduce product utility. Occam’s Razor suggests that product development teams discard as many features as possible and go for the simplest, most effective solution.
  2. Customer service. Simplifying customer services means removing as many barriers as possible. It might be streamlining the customer purchase journey by removing unnecessary sign-up forms. It might also mean removing wait times on customer support calls. Ultimately, consumer behavior is guided by simplicity and a pleasurable shopping experience.
  3. Defining their target audience. No product or business can appeal to everyone, so defining a target audience should be made as simple as possible. Simplicity is achieved by starting small and focusing on the traits of a single, ideal customer to develop a marketing persona.

This is Occam’s Razor at work. Simplifying procedures increases productivity and profitability by focusing on processes most likely to deliver results.

Examples of Occam’s Razor in companies

McDonald’s

In an attempt to boost their profits, McDonald’s created the now-infamous phrase “Would you like fries with that?” Behind this catchphrase, marketers selected a very simple way to increase profits out of what was likely a large spread of options. Fries are of course made with potatoes, which are cheap and abundant and thus very profitable.

Apple

While the removal of the headphone jack may have been a case of over-simplification, the design of the iPhone also reflects Occam’s Razor principles. With just a single button on smartphones and tablet devices, designers gave consumers a sleek and minimalist product without extraneous features.

Where can Occam’s razor be applied in business?

In this section, we’ll detail the ways Occam’s Razor can be applied in business to reduce complexity in certain situations.

Too many websites

Some business owners create a separate website for each of their brands with the belief that more sites equal more sales. However, this does not tend to be the case. Operating a single website is much simpler and more efficient. It is also much more cost-effective since hosting and maintenance costs are reduced.

In the context of marketing, too many websites means finite resources must be spread and diluted in the process. Aside from poor resource utilization, this also reduces an individual website’s ability to dominate its niche and be ranked on the first page of search results.

Other companies dilute their presence with different websites for their B2B and B2C operations. Unless there is a valid reason for doing so, these models should not be separated as doing so only leads to cost increases. Instead, it is better to keep it simple by creating a website that appears for all intents and purposes to be a B2C site. B2B customers can use the site by accessing a password-protected area where they can see a list of business prices, make volume purchases, or contact a dedicated support team, for example.

Bloated proposals

The most persuasive business proposals are those that focus on a simple minimum viable product (MVP).

leaner-mvp
A leaner MVP is the evolution of the MPV approach. Where the market risk is validated before anything else

Why is this the case? For one, simple MVPs tend to be cheaper and as a result, are associated with less risk.  They can also be developed more rapidly, which shortens the time until the company can enter the market. 

Despite these benefits, some product developers choose to ignore Occam’s Razor and develop complicated, bloated proposals where an excess of bells and whistles is the norm. The goal here should be to work with the customer and assess each feature on its own merits to determine whether it contributes to functionality. Superfluous features that do nothing but add complexity to the MVP should be discarded.

International expansion

Business owners can also become preoccupied with complexity when looking to expand into international markets. An eCommerce site looking to sell tennis rackets in France and Spain, for example, may feel the need to replicate their website on a .fr and .es domain. However, this situation is similar to building a separate website for each brand. That is, it tends to be more expensive, more inefficient, and less effective in terms of SEO.

For most eCommerce companies, a simpler course of action involves using canonical link elements for each country on their core website. For example, tennis rackets for sale in France may be found at tennisrackets.com/fr/ and in Spain at tennisrackets.com/es/.

While a .fr site written in French may convert higher, a separate French page on the core tennisrackets.com domain will be effective provided it prices the tennis rackets in euros and details country-specific shipping policies. In fact, any decrease in conversation rate is normally offset by reduced maintenance costs and the increased authority and visibility of the tennisrackets.com domain.

Occam’s Razor vs. Hanlon’s Razor

hanlons-razor
“Never attribute to malice that which is adequately explained by stupidity.”

Similar to Occam’s Razor, Hanlon’s Razor proposes that often an outcome can be explained through stupidity, rather than malice.

In short, in a complex world, where it’s easy to think in terms of conspiracy theories, Hanlon’s razor is a great heuristic, which tells us, often stupidity is the cause of many problems, rather than malice.

Variations of Hanlon’s razor go back as far as German writer Johann Wolfgang von Goethe, who equated malice and stupidity with incompetence. However, the adage was named after Robert J. Hanlon, who submitted the quote for inclusion in a joke book. 

In the modern context, Hanlon’s razor is a somewhat philosophical concept.

Indeed, the principle of a razor in philosophy is one that allows the individual to eliminate or “shave off” unlikely explanations for a particular phenomenon. 

Instead, Hanlon’s razor advocates that problems and bad experiences are part of life. In the vast majority of instances, there is no malice behind them.

Thus, similar to the Occam’s Razor, Hanlon’s Razor proposes a simpler solution to complex situations.

Key takeaways:

  • Occam’s Razor says that the simplest solution is more likely to be the correct solution. The theory does not provide the correct solution 100% of the time, but it does posit that a simpler solution with fewer variables yields more predictable results and is easier for the business to execute.
  • Occam’s Razor helps businesses focus on streamlining product development, simplifying customer service, and defining a target audience. McDonald’s and Apple are two examples of companies that have used simplicity to their advantage.
  • In more general business applications, Occam’s Razor is used to reduce the complexity that arises from too many websites, bloated product proposals, and international expansion efforts.

Connected Business Heuristics

First-Principles Thinking

first-principles-thinking
First-principles thinking – sometimes called reasoning from first principles – is used to reverse-engineer complex problems and encourage creativity. It involves breaking down problems into basic elements and reassembling them from the ground up. Elon Musk is among the strongest proponents of this way of thinking.

Ladder Of Inference

ladder-of-inference
The ladder of inference is a conscious or subconscious thinking process where an individual moves from a fact to a decision or action. The ladder of inference was created by academic Chris Argyris to illustrate how people form and then use mental models to make decisions.

Six Thinking Hats Model

six-thinking-hats-model
The Six Thinking Hats model was created by psychologist Edward de Bono in 1986, who noted that personality type was a key driver of how people approached problem-solving. For example, optimists view situations differently from pessimists. Analytical individuals may generate ideas that a more emotional person would not, and vice versa.

Second-Order Thinking

second-order-thinking
Second-order thinking is a means of assessing the implications of our decisions by considering future consequences. Second-order thinking is a mental model that considers all future possibilities. It encourages individuals to think outside of the box so that they can prepare for every and eventuality. It also discourages the tendency for individuals to default to the most obvious choice.

Lateral Thinking

lateral-thinking
Lateral thinking is a business strategy that involves approaching a problem from a different direction. The strategy attempts to remove traditionally formulaic and routine approaches to problem-solving by advocating creative thinking, therefore finding unconventional ways to solve a known problem. This sort of non-linear approach to problem-solving, can at times, create a big impact.

Moonshot Thinking

moonshot-thinking
Moonshot thinking is an approach to innovation, and it can be applied to business or any other discipline where you target at least 10X goals. That shifts the mindset, and it empowers a team of people to look for unconventional solutions, thus starting from first principles, by leveraging on fast-paced experimentation.

Biases

biases
The concept of cognitive biases was introduced and popularized by the work of Amos Tversky and Daniel Kahneman in 1972. Biases are seen as systematic errors and flaws that make humans deviate from the standards of rationality, thus making us inept at making good decisions under uncertainty.

Bounded Rationality

bounded-rationality
Bounded rationality is a concept attributed to Herbert Simon, an economist and political scientist interested in decision-making and how we make decisions in the real world. In fact, he believed that rather than optimizing (which was the mainstream view in the past decades) humans follow what he called satisficing.

Dunning-Kruger Effect

dunning-kruger-effect
The Dunning-Kruger effect describes a cognitive bias where people with low ability in a task overestimate their ability to perform that task well. Consumers or businesses that do not possess the requisite knowledge make bad decisions. What’s more, knowledge gaps prevent the person or business from seeing their mistakes.

Mandela Effect

mandela-effect
The Mandela effect is a phenomenon where a large group of people remembers an event differently from how it occurred. The Mandela effect was first described in relation to Fiona Broome, who believed that former South African President Nelson Mandela died in prison during the 1980s. While Mandela was released from prison in 1990 and died 23 years later, Broome remembered news coverage of his death in prison and even a speech from his widow. Of course, neither event occurred in reality. But Broome was later to discover that she was not the only one with the same recollection of events.

Crowding-Out Effect

crowding-out-effect
The crowding-out effect occurs when public sector spending reduces spending in the private sector.

Bandwagon Effect

bandwagon-effect
The bandwagon effect tells us that the more a belief or idea has been adopted by more people within a group, the more the individual adoption of that idea might increase within the same group. This is the psychological effect that leads to herd mentality. What in marketing can be associated with social proof.

Read Next: BiasesBounded RationalityMandela EffectDunning-Kruger EffectLindy EffectCrowding Out EffectBandwagon Effect.

Other connected business strategy frameworks

PESTEL Analysis

pestel-analysis
The PESTEL analysis is a framework that can help marketers assess whether macro-economic factors are affecting an organization. This is a critical step that helps organizations identify potential threats and weaknesses that can be used in other frameworks such as SWOT or to gain a broader and better understanding of the overall marketing environment.

STEEP Analysis

steep-analysis
The STEEP analysis is a tool used to map the external factors that impact an organization. STEEP stands for the five key areas on which the analysis focuses: socio-cultural, technological, economic, environmental/ecological, and political. Usually, the STEEP analysis is complementary or alternative to other methods such as SWOT or PESTEL analyses.

STEEPLE Analysis

steeple-analysis
The STEEPLE analysis is a variation of the STEEP analysis. Where the step analysis comprises socio-cultural, technological, economic, environmental/ecological, and political factors as the base of the analysis. The STEEPLE analysis adds other two factors such as Legal and Ethical.

Porter’s Five Forces

porter-five-forces
Porter’s Five Forces is a model that helps organizations to gain a better understanding of their industries and competition. Published for the first time by Professor Michael Porter in his book “Competitive Strategy” in the 1980s. The model breaks down industries and markets by analyzing them through five forces.

SWOT Analysis

swot-analysis
SWOT Analysis is a framework used for evaluating the business’s Strengths, Weaknesses, Opportunities, and Threats. It can aid in identifying the problematic areas of your business so that you can maximize your opportunities. It will also alert you to the challenges your organization might face in the future.

BCG Matrix

bcg-matrix
In the 1970s, Bruce D. Henderson, founder of the Boston Consulting Group, came up with The Product Portfolio (aka BCG Matrix, or Growth-share Matrix), which would look at a successful business product portfolio based on potential growth and market shares. It divided products into four main categories: cash cows, pets (dogs), question marks, and stars.

Balanced Scorecard

balanced-scorecard
First proposed by accounting academic Robert Kaplan, the balanced scorecard is a management system that allows an organization to focus on big-picture strategic goals. The four perspectives of the balanced scorecard include financial, customer, business process, and organizational capacity. From there, according to the balanced scorecard, it’s possible to have a holistic view of the business.

Blue Ocean Strategy 

blue-ocean-strategy
A blue ocean is a strategy where the boundaries of existing markets are redefined, and new uncontested markets are created. At its core, there is value innovation, for which uncontested markets are created, where competition is made irrelevant. And the cost-value trade-off is broken. Thus, companies following a blue ocean strategy offer much more value at a lower cost for the end customers.

Scenario Planning

scenario-planning
Businesses use scenario planning to make assumptions on future events and how their respective business environments may change in response to those future events. Therefore, scenario planning identifies specific uncertainties – or different realities and how they might affect future business operations. Scenario planning attempts at better strategic decision-making by avoiding two pitfalls: underprediction, and overprediction.

Learn also:

Learn more:

Scroll to Top
FourWeekMBA
[class^="wpforms-"]
[class^="wpforms-"]