Start with Why
In its acclaimed book Simon Sinek ( [Sinek11] ) questions Why are some people and organisations more innovative, more influential, and more profitable than others ? Why do some command greater loyalty ?. Sounds familiar ?
Although the book doesn’t deal specifically with strategic management, it covers notions such as leadership and sense of purpose, which ultimately are the key ingredients to successful strategy implementation.
There are only two ways to influence human behaviour
According to Sinek Competitive Advantage is an illusion: ‘ there’s barely a product or service on the market that customers can’t buy from someone else about the same price, about the same quality, the same features, the same level of features […] if you offer something truly novel, someone else will soon come up with something similar and maybe even better ‘.
As a result, most companies don’t really understand why their customers are their customers (neither do they understand why their employees are their employees and even less how to increase their engagement and loyalty).
Sinek considers that there are only two ways to influence human behaviour: manipulation and inspiration.
Companies can become successful thanks to manipulations however none of these tactics will enhance the long-term commitment of customers and/or employees. Gains can be significant but won’t be not long lasting. Sooner or later manipulations will make less money than they actually cost. Usual manipulation technics include:
Price dropping can be very effective (e.g. rebates) however buyers will soon get used to low prices and will delay buying to avoid paying higher prices. As all sellers cut their prices, margins get slimmer. Firms will usually react by seeking to sell larger volume. The most effective way to increase sales volume is to reduce further prices. This downward spiral is the first step toward commoditisation (and contribute to the so-called red-queen effect).
Incentives In the 50’s there were only four car manufacturers in the US, all American. In 2008, American consumers bought more cars from foreigner manufacturers that from American. In the 90’s GM sought to maintain its market share and offered several incentives (cash back, student bonus, etc). Other industries rely on ”two for on”, ”free toy inside”, ”one year free warranty” and other similar manipulation tricks.
Fear (real or perceived) is among the most powerful manipulation.’No one ever got fired for hiring IBM’ as goes the popular adage. This can drive somebody turn down a better offer even if it is not in its company’s best interest. Many ads are based on fear (health risks). When politicians claim that their opponents would do or not do (raise tax, enforce new labour laws, etc) they are attempting to seed fear among voters.
Aspirational messages tempt us toward desirable outcomes, unlike fear that makes us cancel or avoid adverse choices. ’Aspirational messages tempt us with the things we want to have or the person we want to be (ex. get fitter in six weeks only). This technic is more effective for those who lack discipline. It also applies to business-to-business exchanges where sometimes the quicker, cheaper option is preferred over the better long-time solution. Some firms ”never have the time or money to do it right the first time, but they always have the time and money to do it again”.
Social loafing (aka peer pressure) is based on marketers reporting that a majority or the experts prefer their product over another. The technic is an attempt to sway the buyer to believe that what ever they are selling is better. It includes celebrity endorsement, statistics justification, prestigious labs or university backing, etc.
Pseudo Novelty presented as genuine innovations. However, real innovations change the course of industries or even societies: Gutenberg’s press, Edison’s light bulb, Pasteur’s vaccine, Apple’s iTune. Most so-called innovations are just features (sometimes great features and sometimes not) they may differentiate but they don’t re-invent. More often than not, this is more novelty than innovation. Simon Sinek outlines that Colgate for instance offers 32 different types of toothpaste. In addition, their competitors have responded to these innovations and also sell a similar number of variants.
„There is a big difference between repeat business and loyalty. Repeat business is when people do business with you multiple times. Loyalty is when people are willing to turn down a better product or better price to continue doing business with you” (S. Sinek).
Sometimes building loyalty is not relevant, for instance in case of one-off relationships. In such circumstances, manipulations are a perfect valid strategy and can be extremely efficient to achieve a transaction. However, they are two major drawbacks: manipulations are expensive (a firm that heavily relies on these tactics will soon struggle to generate earnings) and it may seriously impact the reputation of a firm.
The Golden Circle
„There are a few leaders who choose to inspire rather than manipulate in order to motivate people. Whether individuals or organisations, every single one of these inspiring leaders, thinks, acts and communicates exactly the same way. And it is the complete opposite of the rest of us” (S. Sinek).
„Most people and organisation think, act and communicate from the outside in, from the clearest things to the fuzziest – for them” (S. Sinek). By contrast „inspiring leaders think, act and communicate from the inside out” (S. Sinek).
S. Sinek describes the two communication patterns through what he calls theGolden Circle: three concentric circles.
What: represents the products and services a company sells or the activities an individual performs. What is usually the easiest to identify.
How: some companies and people know ‘How they do What they do’. They would usually call it their distinctive technology or differentiating process.
Why: very few people or companies can clearly articulate ‘why they do what they do’ - what is their purpose, their cause and their belief. Why does the company exists, why should their employees get out of bed every morning and why should anybody care ?
Sinek stresses that classical sale pitches start from the product and explain why it is better (i.e. how different it is). ACME Computers, for instance, would explain that they make great computers (what) and that they are beautifully designed, simple to use and user-friendly (how).
Apple’s approach is different. They start by their ‘Why’ : Everything we do, we believe in challenging the stats quo. We believe in thinking differently, then they explain ‘How’ they challenge the status quo, for instance by making our products beautifully designed, simple to use and user-friendly. They happen to make great computers (their what). However, unlike with ACME, their products are not the starting point but the materialisation of their ‘Why’. The products and services they offer, represent a tangible evidence of their purpose i.e. ‘why they are in business’.
„People don’t buy what you do, they buy why you are doing it” (S. Sinek)
Everything Apple does, contributes to demonstrating their ‘Why’. We perceive Apple as being very authentic. Apple’s ‘Why’ (challenge the status quo) has formed in the early 70’s and hasn’t changed since then. For instance, they have redirected the course of the personal computer industry (Apple II, MacIntosh, MacBook Air). They have reinvented the music industry with the introduction of iTune. They created the momentum for tablets with the iPad. Most other companies in personal computers or small electronics focus on ’what’ and have been commoditised (e.g. IBM or COMPAQ once leaders in personal computers, have left the segment).
It it about biology (says Sinek)
The difference between thinking, acting and communicating from the outside in versus from the inside out relates to the brain structure claims Sinek. The contrast between the Why and the What is mirrored by the specific structure of the human brain.
The neo-cortex is the outer structure in charge of language, analytical and rational thought. The inner zone, the limbic brain while not having any language capacity, is responsible for our feelings (including trust and loyalty) and for decision-making.
When we start with the WHAT, people can grasp a vast quantity of complex information, but that’s not sufficient to drive behaviour and make decision. By contrast, when we start with the WHY we directly target the decision-making zone and trigger adhesion (or rejection). Decisions are then rationalised (and made verbal) by the language part of the brain.
„The limbic brain is responsible for making us (at least some of us) do things that may seems irrational. Leaving the safe cave for exploring faraway places, crossing wild oceans, climbing hostile mountains, quit a stable job to launch a new business. This kind of behaviour is driven by the underlying belief in something better and bigger” (S. Sinek).
The part of the brain that controls our feelings has no capacity for language. It is this disconnect that makes putting our feeling into words so hard. When you seek to have people make decisions with the rational part of their brain, they end-up overthinking. By contrast, decisions made in the limbic brain (gut decisions) tend to be quicker and higher-quality decisions.
When a company clearly articulates and communicates their WHY (what they believe), they can become markers or symbols of the values and beliefs we hold dear. „Our natural need to belong also makes us good at spotting things that don’t belong, a feeling, deep inside, something we can’t put into words, allows us to feel how some things fits and how some don’t” (S. Sinek).
Likewise, we are drawn at leaders and organisations that are good at communicating what they believe. Their ability to make us feel we belong, to make us feel special, safe and not alone is part of what gives them the ability to inspire us.
Clarity, Discipline and Consistency
The WHY is a belief whereas the HOWs are the actions you take to realise this belief. Last but not least, WHATs are the results of these actions. Authenticity cannot occur without clarity of WHY:
Clarity: You have to know WHY you do WHAT you do. Executives must be able to clearly articulate: Why the organisation exists beyond its products and services.
Discipline: Once the WHY is clear, the HOW should reflect the values and principles your hinging upon to bring your cause to life. It is noteworthy that to be effective guiding principles should be verbs and actions rather than nouns. For instance always do the right things should be preferred to integrity.
Consistency Everything you say and you do, has to prove what you believe. If you are not consistent in what you say and do, then no one will discover what you believe.
Southwest: cheap, fun and simple
Southwest airline was created in 1971 at Dallas TX, by Rolling Kind a businessman and Herb Kelleher his lawyer. Neither of them invented the low-cost airline model. Instead they copied what Pacific SouthWest was already doing in California, and even borrowed the name. However, unlike Pacific SouthWest, Southwest was designed to support a cause.
In the 70’s no more than 15% of the american population could afford flying domestic flight (and even less could fly international routes). Southwest didn’t try to compete with existing entrenched competitors for these 15%. They were interested with addressing the remaining 85% of the population. Their cause, their reason for existing, their WHY was to bring efficient transport to the com- mon man, Then to achieve their WHY, they reused a series of best practices (HOWs) that they had observed other companies doing.
In an era where air travel was still very elitist they had to be cheap and fun to become accessible to the common man. They also needed to be simpler with a straightforward pricing scheme (when they started in the 70’s they offered exactly two tariffs: nights/weekends and daytime).
Their initial tagline Now you are free to move around the country stressed their cause. From its first days of existence, Southwest not only have had customers but they have had loyal followers, people who shared the same values and believes. This might be the reason why Southwest is the only airline that has consistently made profit over the years.
Many airlines trying to mimic Southwest principles, have launched their own low-cost airline subsidiary but have been unsuccessful: they have copied the WHAT but not the WHY. Without a clear sense of WHY, loyalty is more difficult to build, and your products become commodities that customers may select subject to the price and/or convenience.
The law of diffusion of innovations
Everett Rogers a professor of communication studies described how innovations spread through society. According to Rogers, an innovation is communicated through different channels over time among the participants in a social system. There are differences between adoption (the individual decision-process from initial exposure to the full acceptance of using an innovation) and diffusion (the social spreading of the innovation among a group, including peer pressure, social loafing).
Adoption is a five-step process:
Awareness Someone has heard of the innovation but lack information. He or She is however not sufficiently attracted to seek to know more.
Persuasion He/she will start to actively look for information as his/her interest steps up.
Decision After having gathered sufficient information, he /she can decide whether to accept or reject the innovation.
Implementation He/she then starts to use the innovation and to experiment its practical benefits. If he/she is not fully convinced he/she can reverse his/her decision.
Confirmation He /she will continue to use and get benefits from the innovation.
The diffusion looks at how the various people in a group will gradually adopt an innovation. Not all the participants in a society will adopt an innovation at the same pace / at the same time. The rate of adoption is measured as the length of time required for a certain percentage of population to adopt the innovation.
Rogers introduced five categories of adopters (according to their adoption timing): innovators, early adopters, early majority, late majority and laggard. He also established that for most technologies the diffusion of an innovation follows a S-Curve (aka logistics function). Risk-tolerant individuals are willing to adopt first the innovation, followed by the majority that adopts en masse once the technology has become proven. The most risk-averse or change-resistant individuals will adopt last.
Innovators are willing to take risks and to adopt technologies/innovation that may ultimately fail. They are the one who challenge the rest of us to see and think of the world differently. They often are technology freaks.
Early adopters They often are less technology freaks than innovators, but are seeking to solve practical issues. They usually have a high degree of opinion leadership – they don’t necessarily make decisions but can influence and convince others – they tend to be very sociable individuals. They also usually have higher than average social status, education, and wealth. Although quick to identify the potential benefits of an innovation and prone to take some risk, early adopters are not idea generators like innovators.
Early majority they also have higher than average social status, education and wealth, but seldom hold positions of opinion leadership. They are happy to wait and see until a technology is fully stabilised and mature.
Late majority they are more sceptical about innovation in general, are more risk averse - and/or have less financial means.
Laggards these individual can be very reluctant to change or have the lowest financial liquidity. They are the last to adopt the innovation (and more often than not, mainly because they can escape it).
According to the law of diffusion, once the critical mass of 15% to 18% is reached, the diffusion becomes self-sustaining and mass-market success can be achieved. The key priority for any business is to convince 15% to 18% of the potential buyer then like a snowball effect, it spills over to the early majority.
According to Sinek, the best way is to target people who believe what you believe as they will perceive greater value in what you offer than other people and will more happily pay a premium or suffer some early inconvenience. You don’t just want any influencers; you want someone who believes what you believe. Only then will they talk about you without any prompts or incentives; they’ll do it because they want to.