How thinking like a computer can help your business

Algorithmic thinking means big money. Pop into any book or app store, and you’ll find thousands of books and apps on how to improve your mind and brain.

Anticipating and solving problems is what small businesses do best. And that often means thinking like a computer. 

Developing a set of instructions is vital to any entrepreneur’s success, whether it’s setting a price for your products and services or scaling your business. 

In this article, we’ll cover some of the fundamentals you need to consider when applying algorithmic thinking and how it can solve business problems.

What is an algorithm?

Algorithms might seem complicated, but they’re just a set of instructions. Following a recipe to cook spaghetti bolognese is an algorithm.

As the author of the popular Sapiens and Homo Deus bestsellers explains eloquently:

“An algorithm is a methodical set of steps that can be used to make calculations, resolve problems and reach decisions. An algorithm isn’t a particular calculation, but the method followed when making the calculation.”

― Yuval Noah Harari

Software developers are the ultimate problem solvers, and when they’re coding, they automate their thought process by creating a series of steps to build better sites and apps.

Likewise, non-coders can embrace algorithmic thinking to develop their business or passion projects, too.

How to improve your algorithmic thinking 

Systematic thinking requires discipline as most of us subconsciously come up with assumptions to help us navigate through situations.

So anticipating problems and outcomes like a computer (or a coder) isn’t natural, and therefore you have to teach yourself to think differently. 

Let’s take a simple task like organising a series of numbers into a geometric sequence that has a common ratio between them: 2, 4, 8, 16.

In this task, multiplying the previous term in the sequence by two gives the next term.

Most of us can take a look at them, and work out quickly what the order should be, and arrange the numbers correctly without too much thought.

Only a computer would break this thought process down into individual steps. A machine can’t jump into a dictionary to find a word based on its spelling. Instead, it requires specific instructions on where to start and end. 

So how do you think algorithmically?

In essence, algorithmic thinking is about how to solve a problem in a systematic way. 

The process includes:

• Defining your problem 
• Breaking your problem down into simple parts
• Defining your solution for each part of the problem
• Implementing the solution

Taking the time to break down a problem will help you understand it better and identify which solutions derive from this approach. 

How to apply algorithmic thinking to your business

One example of algorithmic thinking is when you decide to start a new company and need a business plan. All of your steps must be listed correctly, which is known as sequencing.

A business plan is a set of instructions made up of several sections, including developing a business idea and breaking your idea into small parts. You would need to identify:

• What your product or service does
• What “problem” does your idea solve 
• What makes your business stand out from companies offering similar services

By thinking systematically, you will gain a better understanding of whether your business plan is likely to succeed or not. 

Setting a fair price

Let’s say you’re trying to set a price for your product or service. 

Your pricing affects how customers perceive what you’re selling. Price your product or service too high and you’ll miss out on sales; too low and you’ll lose revenue and weaken your business in the long term. 

How to set a price systematically

• Identify who your customers are. Target your ideal customer and their experiences of the problem you’re “solving.”

• Work out how much they’re likely to pay. Do market research in person and online so you can understand how a price change might affect demand for your product or service. 

• See what your competitors are doing. Compare your business to others and work out what you do differently. If you’re offering a near-identical product or service, identify what you do better and price this markup in financial terms. 

• Work out your costs. How much will it cost to make or provide what you’re selling? Identify your break-even point for your product or service so you won’t lose money. 

• Develop a pricing strategy. Whether your business is cost-based or value-based, you can now implement a smarter pricing strategy by following the previous steps. 

• Compensate for discounts. Are you willing to lower your price to sell more items? Identify the discounts you’d be open to making so you’re still making a profit overall.

• Review your prices and update them. Change is inevitable, so checking your prices every month will enable you to stay one foot ahead of the competition. 

OK computer

When you break things down and list out all the steps, you’re less likely to miss one, and the problem won’t seem so bad. By thinking like a computer, you’re far more likely to set the right price than hoping for the best. 

Also, if your business plan is unlikely to work, you will spot this early on, enabling you to minimize the risk. Therefore, being able to break down complex problems is as valuable as having technical skills.

While memorizing algorithms like a coder is helpful, what’s more valuable is embracing algorithmic thinking. Your entrepreneurial dreams are more likely to succeed if you train your brain to apply systematic logic than relying on gut instinct alone.

Discover how you can start a business and apply algorithmic thinking in seven steps.