Geoff Tuff - Provoke

With that, let's play the training video …

“I thought we were finally going to move! But in the end, we acted like ourselves again. Can I ask a favor? Can we chat for a minute tomorrow, early your time?”

Geoff looked down at his phone at the text from an old client in the United Kingdom. He had worked with Sammy for a long time at his prior company, but they hadn't spoken for a while as Sammy adjusted to his new company and role. Geoff was curious to hear what was going on when the phone rang the following morning.

After pleasantries, Sammy jumped into what he wanted to share. “So, we have been working on this new product launch for the last several months. I'm really excited, and so is the vast majority of the management team when we talk about things in private. But get them into a meeting, and all of a sudden the enthusiasm at the water cooler turns into silence in the meeting.”

Geoff asked Sammy to share an example of a recent meeting. “We had come into this session with some new thinking to share. We showed that there is a group of customers that should be highly likely to adopt a new offer we've been toying around with. We've learned a lot about the needs of this group and feel like they will be very willing to pay for this “concierge” level of service. I've been trying to get the team to let us launch a prototype at a few stores in some key markets just to try it out. But every meeting is kind of like Groundhog Day .”

“Say more,” said Geoff.

Sammy continued, “So I was in the meeting, and we presented the analysis, mostly to head nods. Not a lot of negative comments throughout. There were five people in the meeting with me. One of them – Joe – spoke first as we moved out of the presentation into discussion: ‘I'm supportive. I really think the concierge program is a big opportunity and we need to move on it quickly.’ Then, Reshmi shared a similar perspective: ‘I like it, too. I also don't think the competition is looking at anything similar so we can get out ahead.’ Two other people nodded.

“I then said, ‘Okay, great. I'll get the team moving on a prototype.’ I thought we were moving forward this time. I really did. Then the fifth person, Molly, who had been sitting silently said, ‘One quick question, Sammy. Have you guys given any thought to how we'll scale this across some of the smaller markets? I know we're starting in the large markets, which makes a ton of sense. Have we thought about how we'll roll this out to the broader markets?’”

Geoff knew what was coming next.

Sammy continued. “‘Actually, Molly, given the proportion of our sales that come from smaller markets, we haven't given this a ton of thought. We think that if we are successful in large markets, that's a win in and by itself.’”

Sammy sighed. “That's when the floodgates opened. Antonio then weighed in. ‘Molly makes a good point. It's probably not a bad idea to put some thinking behind this.’ And then came Paula. ‘I agree, it can't hurt.’ Joe then sealed the deal. ‘Sammy, why don't we give you a few weeks to think this through, and then we can see your analysis.’”

It was at this point that Sammy picked up the phone and called Geoff. He was at his wits’ end and ready to quit.

“Honestly: we have to make a move here or we'll be stuck trying to play catch-up. Why is it that herd mentality tends to favor caution and incrementalism instead of being bold?!”

We expect that the story depicted in the “training video” is recognizable to most of you. It happens just about every day in organizations around the world. A combination of basic human biases – what we call fatal flaws – and organizational dysfunction mean that most businesses systematically miss the opportunity to take early action against emerging trends – whether they are still in the “if” stage or the early stages of “when.” They wait until the only choice is one of adaptation.

We call these cognitive biases “fatal flaws” only somewhat in jest. People aren't literally dying from them, but they can make the difference between an organization failing or thriving. Successfully spotting subtle – or not-so-subtle – trends that meaningfully impact the prospects for businesses is a fundamentally important capability that impacts every business, big or small, old economy or new economy, virtual or physical.

When businesses are faced with fundamental changes to the environment in which they operate, leaders have a choice – but only if they can effectively identify the meaningful trends . Those choices involve either riding the trend downwards, adjusting the business model to fit the emerging trend, or shaping the trend to create advantage. None of these is a “wrong” choice, by the way. Riding a trend downwards can be a very profitable choice. Many diversified companies that had tobacco divisions have spun them into singular entities that have no other businesses, and they pay massive dividends, despite having an addressable market that shrinks every year. The problem is, most companies that end up in wind-down mode do so accidentally … missing any opportunity to create advantage along the way.

Choosing not to adjust your business model means the company is effectively choosing to be a wind-down firm – one that has a finite life, a business that is terminal. They're winding down, even if executives in the industry fail to recognize this fact. Print publishing companies that choose not to migrate to a digital platform in the face of shrinking paper readership or traditional department stores that do not adjust their core value proposition (i.e., everything under one roof) in the face of intense online competition are examples of this. The question that will most likely impact the amount of value created during the wind-down is whether the move is executed as a purposeful choice, or inadvertently because all other options have dried up.

At the end of Detonate we pondered the value of being a pop-up firm: one that is formed and launched with a planned extinction date. Temporary retail stores – ones for limited edition goods in Japan or Halloween costumes in the United States – are great examples of this. Vaccine sites (we hope, at the time of writing) could be another. These entities have taken the ultimate step in embracing impermanence as a way to create advantage for themselves. Bringing some of the pop-up mindset to the wind-down world, whether you end up there with foresight or by accident, is a critical tool for any company operating in an uncertain market. Based on our experience, though, we think most management teams want to avoid being wind-down firms. Unfortunately, they don't make the logic clear with the other members of the management team. We believe that having an explicit conversation about whether to ride a falling trend or make the necessary investment to evolve a business model is critical – and most organizations never have this conversation as a result of the fatal flaws.

There's nothing fundamentally wrong with either strategic path. Winding down a company over a period of time can be very profitable. And adaptation can be really hard. However, one recipe for failure is to try to operate as if you're going to last forever when the external conditions dictate winding down. Here's the crux of the reason that cognitive biases and organizational dysfunction are so detrimental. Many management teams don't identify the trends, they don't have the conversation, and then they fall into predictable patterns that avoid putting critical issues on the table to decide whether to adapt to the emerging trend or wind down the company.