PART 1 A World That Doesn’t Start With Why
our behavior is affected by our assumptions or our perceived truths. We make decisions based on what we think we know. It wasn’t too long ago that the majority of people believed the world was flat. This perceived truth impacted behavior. During this period, there was very little exploration. People feared that if they traveled too far they might fall off the edge of the earth. So for the most part they stayed put. It wasn’t until that minor detail was revealed—the world is round—that behaviors changed on a massive scale. Upon this discovery, societies began to traverse the planet.
There is a wonderful story of a group of American car executives who went to Japan to see a Japanese assembly line. At the end of the line, the doors were put on the hinges, the same as in America. But something was missing. In the United States, a line worker would take a rubber mallet and tap the edges of the door to ensure that it fit perfectly. In Japan, that job didn’t seem to exist. Confused, the American auto executives asked at what point they made sure the door fit perfectly. Their Japanese guide looked at them and smiled sheepishly. “We make sure it fits when we design it.” In the Japanese auto plant, they didn’t examine the problem and accumulate data to figure out the best solution—they engineered the outcome they wanted from the beginning. If they didn’t achieve their desired outcome, they understood it was because of a decision they made at the start of the process.
There is a wonderful story of a group of American car executives who went to Japan to see a Japanese assembly line. At the end of the line, the doors were put on the hinges, the same as in America. But something was missing. In the United States, a line worker would take a rubber mallet and tap the edges of the door to ensure that it fit perfectly. In Japan, that job didn’t seem to exist. Confused, the American auto executives asked at what point they made sure the door fit perfectly. Their Japanese guide looked at them and smiled sheepishly. “We make sure it fits when we design it.” In the Japanese auto plant, they didn’t examine the problem and accumulate data to figure out the best solution—they engineered the outcome they wanted from the beginning. If they didn’t achieve their desired outcome, they understood it was because of a decision they made at the start of the process. At the end of the day, the doors on the American-made and Japanese-made cars appeared to fit when each rolled off the assembly line. Except the Japanese didn’t need to employ someone to hammer doors, nor did they need to buy any mallets. More importantly, the Japanese doors are likely to last longer and maybe even be more structurally sound in an accident. All this for no other reason than they ensured the pieces fit from the start.
cannot see. Every instruction we give, every course of action we set, every result we desire, starts with the same thing: a decision. There are those who decide to manipulate the door to fit to achieve the desired result and there are those who start from somewhere very different. Though both courses of action may yield similar short-term results, it is what we can’t see that makes long-term success more predictable for only one. The one that understood why the doors need to fit by design and not by default.
Every instruction we give, every course of action we set, every result we desire, starts with the same thing: a decision. There are those who decide to manipulate the door to fit to achieve the desired result and there are those who start from somewhere very different. Though both courses of action may yield similar short-term results, it is what we can’t see that makes long-term success more predictable for only one. The one that understood why the doors need to fit by design and not by default.
There’s barely a product or service on the market today that customers can’t buy from someone else for about the same price, about the same quality, about the same level of service and about the same features. If you truly have a first-mover’s advantage, it’s probably lost in a matter of months. If you offer something truly novel, someone else will soon come up with something similar and maybe even better. But if you ask most businesses why their customers are their customers, most will tell you it’s because of superior quality, features, price or service. In other words, most companies have no clue why their customers are their customers.
For the seller, selling based on price is like heroin. The short-term gain is fantastic, but the more you do it, the harder it becomes to kick the habit. Once buyers get used to paying a lower-than-average price for a product or service, it is very hard to get them to pay more. And the sellers, facing overwhelming pressure to push prices lower and lower in order to compete, find their margins cut slimmer and slimmer. This only drives a need to sell more to compensate. And the quickest way to do that is price again. And so the downward spiral of price addiction sets in. In the drug world, these addicts are called junkies. In the business world, we call them commodities. Insurance. Home computers. Mobile phone service. Any number of packaged goods. The list of commodities created by the price game goes on and on. In nearly every circumstance, the companies that are forced to treat their products as commodities brought it upon themselves. I cannot debate that dropping the price is not a perfectly legitimate way of driving business; the challenge is staying profitable.
Though positive in nature, aspirational messages are most effective with those who lack discipline or have a nagging fear or insecurity that they don’t have the ability to achieve their dreams on their own (which, at various times for various reasons, is everyone).
Someone who lives a healthy lifestyle and is in a habit of exercising does not respond to “six easy steps to losing weight.”
Gym memberships tend to rise about 12 percent every January, as people try to fulfill their New Year’s aspiration to live a healthier life.
Gym memberships tend to rise about 12 percent every January, as people try to fulfill their New Year’s aspiration to live a healthier life. Yet only a fraction of those aspiring fitness buffs are still attending the gym by the end of the year.
The peer pressure works because we believe that the majority or the experts might know more than we do. Peer pressure works not because the majority or the experts are always right, but because we fear that we may be wrong.
Real innovation changes the course of industries or even society. The light bulb, the microwave oven, the fax machine, iTunes. These are true innovations that changed how we conduct business, altered how we live our lives, and, in the case of iTunes, challenged an industry to completely reevaluate its business model. Adding a camera to a mobile phone, for example, is not an innovation—a great feature, for sure, but not industry-altering.
What companies cleverly disguise as “innovation” is in fact novelty.
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 a better price to continue doing business with you. Loyal customers often don’t even bother to research the competition or entertain other options. Loyalty is not easily won. Repeat business, however, is. All it takes is more manipulations.
“It’s simple,” explains the TV infomercial, “simply put your old gold jewelry in the prepaid, insured envelope and we’ll send you a check for the value of the gold in just two days.” Mygoldenvelope.com is one of the leaders in this industry, serving as a broker for gold to be sent to a refinery, melted down, and reintroduced into the commodity market. When Douglas Feirstein and Michael Moran started the company, they wanted to be the best in the business. They wanted to transform an industry with the reputation of a back-alley pawn shop and give it a bit of a Tiffany’s sheen. They invested money in making the experience perfect. They worked to make the customer service experience ideal. They were both successful entrepreneurs and knew the value of building a brand and a strong customer experience. They’d spent a lot of money trying to get the balance right, and they made sure to explain their difference in direct response advertising on various local and national cable stations. “Better than the similar offers,” they’d say. And they were right. But the investment didn’t pay off as expected. A few months later, Feirstein and Moran made a significant discovery: almost all of their customers did business with them only once. They had a transactional business yet they were trying to make it so much more than that. So they stopped trying to make their service “better than similar offers,” and instead settled with good. Given that most people were not going to become repeat customers, there weren’t going to be any head-to-head comparisons made to the other services. All they needed to do was drive a purchase decision and offer a pleasant enough experience that people would recommend it to a friend. Any more was unnecessary. Once the owners of mygoldenvelope.com realized they didn’t need to invest in the things that build loyalty if all they wanted to do was drive transactions, their business became vastly more efficient and more profitable.
It’s not an accident that doing business today, and being in the workforce today, is more stressful than it used to be. Peter Whybrow, in his book American Mania: When More Is Not Enough, argues that many of the ills that we suffer from today have very little to do with the bad food we’re eating or the partially hydrogenated oils in our diet. Rather, Whybrow says, it’s the way that corporate America has developed that has increased our stress to levels so high we’re literally making ourselves sick because of it. Americans are suffering ulcers, depression, high blood pressure, anxiety, and cancer at record levels. According to Whybrow, all those promises of more, more, more are actually overloading the reward circuits of our brain. The short-term gains that drive business in America today are actually destroying our health.