Chapter 2

How We Miss Hidden Potential

A few years ago I would have been surprised to be writing a book called Start with What Works. The notion would have sounded obvious. But if you look at what actually happens in organisations, you’ll see that managers often start with what doesn’t work. And from one point of view, it makes sense. Managers need to be good problem solvers: that means they are looking for what is not working so they can run in and solve it. But although they succeed in solving those problems and therefore keeping the show on the road, they may be reinforcing a mindset of limited expectations.

Here’s what I mean. Given a problem, the job is to get everything back the way it was. The hidden assumption is that yesterday’s standard is the gold standard. Perhaps people would question that assumption if they felt they had the time, but they neglect to because they’re so busy making sure stuff gets done. That’s a shame, because another look at the assumption could be time well spent.

You can’t ignore (most) problems. But a habitual focus on what’s not working makes managers miss hidden resources and the potential contained therein. To release that potential, it is necessary to first look for and promote examples of what is working.

In particular, you need to be vigilant for positive anomalies: situations where results are out of proportion to what you’d expect for the effort. For example, the guy with his feet up on the desk who nonetheless seems to make the most sales, or one particular customer who is – inexplicably – sending you disproportionate amounts of referral business. These anomalies are clues to better results without extra time and effort.

It’s Already Happening Somewhere: Find and Utilise What Is Working

Most organisations could call on overlooked resources that would make a tremendous difference to them. The trouble is that they can’t always find their way to those resources. It’s as if they’ve forgotten that they have them. In this way, organisational memory is like individual memory: we have access to much more than we remember.

To see what I mean, let me ask you a question: have you ever flicked back through your holiday photos and rediscovered events that you had forgotten, even though they happened quite recently? It’s not that you had exactly forgotten these events, but you wouldn’t have remembered them, either, if it weren’t for the prompts.

I find that my clients have a similarly selective amnesia. It shows up all the time in my work with them. It’s a source of repeated surprise and delight to find that a client has already done the thing, or has the knowledge, that – if reapplied or reconfigured – would transform their situation.

For example, I was working with an entrepreneur who wanted to validate a business idea before spending too much time and money on it. To do that, he needed to find and speak with a specific type of difficult-to-reach ‘senior executive.’ To listen to him, getting such a person to give him their time would be almost as hard as building the business itself. I enquired – forensically, to his irritation – into the characteristics he was seeking.

‘They’d be a top-level finance executive of a substantial business – at least $1 billion in revenues – who was not just concerned with compliance or costs, but was genuinely prepared to support innovation across their business.’

‘What else?’ I asked.

‘They wouldn’t just be paying lip-service to doing new things: they’d really mean it.’

‘What else?’

‘For goodness sake, I don’t know. Er . . .  they’d have the authority to take action and the clout to make it stick.’

‘What else?’

‘Andy, you are starting to irritate me! Erm . . . they’d be intellectually curious enough to listen to how my idea might help them, and . . . wait a minute! I met someone like that only last week at a university alumni event. He’s based in Hong Kong. I’ll email him!’

It still fascinates me. How could this entrepreneur have forgotten that he knew exactly the person he needed already? I find that this kind of thing happens all the time, but most people don’t seem to notice it.

When we’re too focused on short-term targets, or ironically, too driven by ‘productivity systems’, our attention narrows and we lose access to things we know. This hard-charging entrepreneur needed to stop and think. Once he took a new perspective, he realised he had the answer already.

Just as individuals forget what they know, so do organisations. I worked with a divisional vice president who needed to increase sales to large existing customers in a hurry. His team’s discussions had settled into a rut: all they could think of was to launch new – ­unspecified – products, recruit additional salespeople, or both. Not very original, but not unreasonable either. The problem was, the business cases were yet to be made and, even assuming approval, the actual implementation was going to be too slow to hit his assigned target.

We looked at the issue afresh and concluded that what actually could work in time was a new ‘customer intimacy’ programme. This programme would take advantage of my client’s position in the ­market, enabling them to provide valuable insights and exclusive connections for customers in exchange for a recurring subscription.

‘You mean it would be like this programme we designed in 2012?’ said a colleague.

With the groundwork already done, the programme was implemented in three months.

When you flick back through holiday photos, it re-evokes positive memories. That’s the whole idea on which Kodak and Polaroid built their businesses. It’s not that we’ve forgotten the memories – it’s just that we don’t remember them. Similarly, more often than you think, it’s not that you don’t have the ability to achieve something, it’s that you don’t remember that you do.

Many of the principles we’ll meet in the following chapters are designed to re-evoke your knowledge of resources you have already.

Reasons We Overlook What We Have Already

Starting with what works can feel odd for managers who have achieved success by being problem solvers. The problem with problem solving is that you move things back to status quo, rather than advancing the action. In contrast, when you start with what works, you’re not only fixing things but you’re potentially opening up whole new avenues, based on your strengths and the resources that you already have. But if this is such a great idea, why don’t more organisations do it? Let’s look at some of the mindsets responsible.

1. We’re seduced by the idea of a saviour

Frequently, managers overlook resources they have at hand, and instead, they look outside for one-shot solutions. They’re hoping that something or someone from the outside will bring in a kind of magic bullet that’s going to do all the work. That doesn’t usually happen.

One of the most common ways managers look too quickly to the outside for help is in trying to buy in, what I call, a saviour solution. These managers assume that a saviour has some special knowledge or ability that no one inside the organisation has. Here’s an example of a typical saviour:

The Rockstar Hire. They arrive with a fanfare and a burnished track record. They race in to rearrange the deckchairs. They fail to appreciate the existing talent, teamwork and achievements of their new colleagues. Their mantra is, ‘When I was at Google/Apple/Amazon/Goldman Sachs/______ (fill in the blank) we did this.’ Research shows that these Rockstar Hires often disappoint, mainly because their previous success, though real, was not just down to them. They rode a wave created by teamwork, slick processes, great product–market fit and talented colleagues.

Of course, saviours don’t have to appear in human form. Here are two examples of inanimate saviour solutions:

The Acquisition. It’s easy for bosses to find themselves sequestered in the corner office with only their bankers to talk to. There, they lose touch with the actual business – with their employees and customers. Their world is reduced to a bunch of spreadsheets. And so the answer to the question, ‘How do I grow?’ is naturally, ‘Do a deal. Buy something.’ It’s exciting to be a deal-maker! But once you’ve bought a business, you have to integrate it. And to do that, you better know a lot about the strangers you call your employees and your customers.

The New IT System. How many times have you heard someone say that the answer to the company’s challenges is a new customer relationship management (CRM) system, a new enterprise resource planning (ERP) system, or these days especially, some artificial intelligence (AI)? To listen to the proponents of these systems you would think getting the thing set up will be a breeze, after which everyone will enthusiastically embrace their changed work routines, leading to guaranteed success. But it rarely seems to go as smoothly in practice.

Don’t get me wrong. I’m all for hiring the best talent, intelligent deal making and benefiting from the intelligent use of technology. The problem lies in seeing these things as saviours, because saviours often turn out to have feet of clay. In fact, ‘rockstar’ hires, mergers & acquisitions and showcase IT projects are among the highest-risk things business leaders can rely on.

2. We copy the wrong things from the outside, rather than seeking the right things within

Businesses copy each other too much. It might be from a desire for safety in numbers, an obsession with ‘industry best practices’, or simple laziness. There is no law saying that your call centre message needs to say, ‘Your call is important to us,’ yet everyone’s does.

Of course it can make sense to copy successful performers, but only if you copy the things that make the difference. It’s easy to look at successful performers and draw the wrong conclusions about the causes of their success. I once heard this put graphically as follows: All CEOs go to the toilet, but nobody thinks that is a common factor in their career success as business leaders.

This is a potential problem for all business books that hold up successful companies as exemplars. That includes my book, of course, which is why I recommend that you check that lessons from others actually apply to you (see Chapter 6, ‘Let The World Teach You’). Examples are great for inspiration and as a source of idea you can test, but not as models to be blindly followed.

3. We don’t notice the familiar

On my way home I often have to stop at the same set of traffic lights. The first time I was stuck at those lights, my attention was caught by an unusual sign. It said UTCHE.

That confused me momentarily. I thought, ‘What is UTCHE? – is it a foreign language – maybe something Germanic? Is it a brand name? Or a type of shop?’

These questions flashed through my mind almost ­instantaneously. There was that moment of confusion, of novelty. A bit like when you wake up in a hotel room and you’re not sure where you are for a moment. And then I realised what was going on. The sign used to say BUTCHER. But the letters B and R had fallen off.

Now, when the letters first fell off, the butcher probably noticed. Even if he didn’t, someone almost certainly came into the shop and said, ‘Oi, Mate. The letters have fallen off your sign.’ And the butcher really meant to get the sign fixed. But he was busy. He procrastinated. A few days went by and he didn’t get round to it. Pretty soon he stopped noticing that sign at all.

Now if the butcher crossed the street and looked at his shop from the other side, the way it would appear to a prospective customer, then: WHAM! It would hit him in the face. It would be a really clear signal that he could use to better run his business.

But he walks by it every day and isn’t even aware of it. He’s not aware that it’s putting prospective customers off. And so his business bumbles along.

I’m not having a go at that butcher. It’s easy to have this sort of thing happen. We probably all have similar things at home: a toilet roll holder that fell off, a scratch on a floor, a bent light shade you meant to replace, an ‘urgent’ Post-it note on a computer screen that’s been there for three months.

You see these things, in the sense that the light hits your retina, but you no longer perceive them. It’s very human.

How many of these signals are we missing – at home or in our businesses? It’s really hard to say. Unless you can somehow figure out a way to take the perspective you get ‘on the other side of the street’ – the prospective customer’s point of view – you will be ­oblivious to these things.

4. We get caught up in a dream world

Nick Bostrom, a philosopher from Oxford, and Elon Musk, ­everybody’s favourite example of an entrepreneur these days, both ­seriously seem to believe we are living in a computer simulation like the one in the film, The Matrix.

It sounds a bit bonkers to me. But that doesn’t mean I disagree with the idea that we live in a world of illusion. Businesses as well as individuals have to strive to remain in contact with reality – or else.

When I became a consultant, the first lesson my mentor taught me was to be mindful to deal with ‘observable behaviour and evidence in the environment.’ It’s wise advice for all business people – hearsay and mistaken beliefs can easily send you in the wrong direction.

It’s very easy to get caught up in convincing illusions.

One morning, while walking in the park near where I live, I saw a magpie standing on the grass. Nothing unusual in that – they’re very common in that park. What was unusual was that as I got nearer to it, it transformed into a shiny black bin bag! The effect was so ­striking that I laughed out loud at the trick my mind had played.

A psychologist might explain that perception is largely constructed from a mixture of memories and expectations. I expect to see magpies in the park, and so given a plausible signal, I saw a magpie.

This then got me wondering: what if I hadn’t got close enough to discover the bin bag? I would have known that I had seen a magpie, for sure. And yet I would have been completely mistaken.

And there’s another layer of illusion once you consider the effect of beliefs. In England at least, the number of magpies one encounters is the subject of superstition. This is captured in the rhyme: ‘One for sorrow, two for joy, three for a girl, and four for a boy.’ So if I were superstitious, I wouldn’t just have seen a bird, I’d have seen an omen!

Maybe this would colour the rest of the day. I’d see innocent coincidences as threats. Maybe I’d overlook opportunities, dismissing them as too good to be true. Maybe I’d dwell on perceived weaknesses in myself and others, while disregarding strengths.

What are some of the convincing illusions business people can get caught up in? Well, for example, that:

These illusions are convincing: they seem real!

All of us can get caught out by this stuff. That’s why we need ways to escape the bewitching effect of what we think we know.

5. We won’t accept prophets in their own land

Too many managers overlook the staff’s views, and therefore cut themselves off from a vast store of potential for business improvement.

Sometimes, regrettably, they are deliberately dismissive, seeing frontline people as less qualified and of lower status in the ­pecking order. ‘What can they know?’ they ask themselves. More often though, the bias is unconscious – it simply doesn’t occur to executives to consider whether the frontline might have valuable insights and ideas.

Whatever the causes, the tendency is damaging. One turnaround specialist says that the first thing he does when called in to rescue a failing business is to talk to the shopfloor and customer service people to find out ‘how management have messed up the business, and what we should do to fix it.’

The answers are almost always valuable. Time and again, the information to help the business has been there all along, but was ignored by managers.

People on the frontline know about customers, they know about waste, and they know about bottlenecks. How well do you tap into that knowledge?

6. Exotica from afar distract us from what we have

Justin Haber is a professional footballer from Malta. He is also the owner of a restaurant that featured on the Netflix business turnaround series ‘Restaurants on The Edge’. Haber is a fanatic about seafood. Consequently, he was flying in the finest oysters from Normandy, langoustine from Norway and so on. As you can imagine, his costs were astronomical, as were his losses. What was bizarre was this: just 100 metres from his harbour-front restaurant was a seafood market selling superb Mediterranean produce caught that day. How is it possible that he could have overlooked this?

Maybe you could just say Haber is a better footballer than restaurateur. But I think the issue is not so much about acumen as ­perception. Normandy oysters and Norwegian langoustine have cachet, amplified by being sourced somewhere else. If you’re from Malta, they seem more exotic than the produce at the local fish market.

The word ‘exotic’ literally means ‘from the outside’. The expert from afar is more appealing than the prophet from our own land. I once heard a New Yorker confess that while he’d never visited the Statue of Liberty, he couldn’t wait to get to Paris to see the Eiffel Tower. Stuff from outside just seems more valuable, whether or not it actually is.

7. We get stuck in existing categories

The Platypus is a strange creature found in eastern Australia. Like many reptiles, it lays eggs instead of giving birth to live young. But unlike a reptile, it is warm-blooded. The bizarre appearance of this egg-laying, venomous, duck-billed, beaver-tailed, otter-footed mammal baffled European naturalists when they first encountered it. Some considered it an elaborate fraud – they thought that tricky taxidermists had sewn a duck’s beak onto the body of a beaver.

Is a Platypus a mammal or a reptile? How can such an ‘anomaly’ (the Brisbane Times recently called it ‘a genetic mongrel’) exist? Such questions are not relevant to the Platypus of course, which has been thriving for millions of years without the warrant of some Victorian naturalist from London, or newspaper hack from Brisbane.

When observed facts do not fit in with existing categories, people struggle. They resist the facts, or just explain them away. This is a huge trap for ‘industry experts.’ Think about the way the major US automakers responded to early ‘compact’ Japanese imports in the 1970s. They basically said: ‘Call that a car?’ and carried on building gas-guzzlers. This is the same mindset that predicted doom when Alan Mulally was appointed CEO at Ford. They ‘knew’ that you couldn’t run a US car company unless you were ‘a car guy’, and Mulally was from aviation, having been a senior executive at Boeing. He responded by engineering a dramatic turnaround, pursuing a global strategy substantially based, as it happens, on a compact platform. The company’s performance in 2010 was its best in a decade. Maybe those ‘industry insiders’ would benefit from some practice in allowing new ideas to re-jig their tired old categories?

8. We dismiss positive anomalies and outliers because we rely on statistical summaries

My clients know I am fond of the following joke: ‘Did you hear the one about the statistician who drowned crossing a river of an average depth of two feet?’ Averaging makes large amounts of information easier to grasp, but it can hide the most useful and critical data points. There are so many applications of this insight that it is well worth developing the habit of treating all averages with suspicion. Here’s just one example:

FT.com on May 24, 2013 carried an interesting article by David Oakley, Investment Correspondent. It was entitled ‘Time to buy Europe’s world-beating shares’. It starts as follows: ‘It is a fact that might cause a few raised eyebrows. Some of Europe’s world-beating companies and stocks are domiciled in the very countries commonly regarded as the eurozone’s laggards. From a Spanish sausage skin maker to an Irish betting group and Italian fashion business, the eurozone’s economically challenged periphery is the base for some of the best-performing stocks anywhere in the world.’ Do read the original article for the company examples which include Viscofan, a Spanish sausage skin maker, Inditex, the Spanish fashion retailer that owns Zara, and Salvatore Ferragamo, the Italian clothing and accessories company.

There is an extremely important reminder in this story: when people talk about ‘the economy’, they are doing so on the average. Individual companies may have much higher growth than the GDP growth of the country they are in, or the growth of the industrial sector or market they are in. Similarly, individual companies may also have dramatically higher profitability than their sector average.

Averages can mask similar effects inside companies, too. Sometimes one team, or one shop, or one manufacturing cell, or one individual may have outlying performance that is hidden by the statistics. For example, my friend Alastair Dryburgh,1 author of Everything You Know About Business is Wrong, was once appointed Commercial Director of a marketing consultancy. The business had been putting huge effort into trying to raise its profitability. Alastair calculated the consultancy’s average profit per hour. It was £120. Then he looked at the detail. Some projects were earning as much as £300 per hour, while others only earned £30! Yet without this analysis, it looked as if all the consultants were contributing equally. ­Simply by stopping taking on certain types of unprofitable projects and zeroing in on the profitable types, he was able to raise average profit per hour by 25% in nine months.

It we let our alertness slip, it’s easy to be lulled into the assumption that we are at the mercy of what are, after all, abstractions: ‘the economy’, ‘GDP’, ‘consumer sentiment’. I’m not saying these convey no information, but they don’t always contain much of use. I often hear economic indicators being used to create compelling-sounding rationales for battening down the hatches, where other companies sailing in the same conditions are making dramatic progress.

Where is best to focus: on depressing abstract summaries, or on specific, concrete, inspiring counter-examples?

9. We ‘know’ too much about the business

Readers might understandably say: ‘I’ve done well with this business so far. I’ve got people who know this industry working flat out. I don’t believe there is significant extra potential from what is already here. What makes you think there is?’

Paradoxically, extensive experience in a business can make it too easy to overlook the hidden potential therein. As managers develop experience, their expectations for what is possible quickly habituate. They get used to their industry, their organisation and their people. When they look at it, they see possibilities that are only incremental improvements – ‘more of the same.’ Wise managers need to be alert to this and have tools and practices to see a familiar world in a new light.

In Summary

We’ve looked at some of the habitual mindsets that get in the way of appreciating what works, and making more of our hidden resources. People forget what they have, they undervalue what they have, and they let shiny objects get in the way, distorting their perceptions.

The good news is that there are antidotes to these habitual mindsets. So in the following chapters, let’s take a look at these antidotes: the principles, mindsets and tools that are going to let you create your gold.