Drilling for Diamonds

Answer these questions, yes or no:

1. Are you an above average driver?
2. Do you have an above average ability to judge humour?
3. Does your professional judgement place you in the top half of your organisation?

If you are like most people, you will have answered yes to all three questions. Social psychologists call this the illusion of superiority, which suggests people have an unrealistically positive view of themselves. Remarkably, research shows the least capable people have the largest gaps between what they can do and what they actually achieve. In other words, the least competent are often the most confident.

The illusion of superiority is often combined with two other illusions: The illusion of optimism and the illusion of control.

The illusion of optimism makes people see their future as brighter than others.

The illusion of control makes people behave as if events are subject to their control.

These three illusions are probably driving CEO’s to continue to fuel multi-trillion dollar global mergers and acquisitions where most deals destroy rather than create value for the acquiring company.

To gain insight into how we consistently make bad decisions you should read Michael J Mauboussin’s latest book Think Twice (2010).

Mauboussin is Chief Investment Strategist at Legg Mason Capital management and adjunct professor of finance at Columbia Business School. He is also the author of the brilliant and acclaimed book More Than You Know.

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Western companies struggle to cope with contradictions. Our language is typically bipolar: right and wrong, true and false, black and white.

By contrast, Eastern cultures see opposites not as contradictions but as complementary. Edward de Bono talks about a Western stone culture and an Eastern water culture. Physician Barry Johnson talks about similar issues in his book ‘Polarity Management‘.

Hermann Simon, in his book Hidden Champions of the 21^st Century talks about how hidden champion Gore, the world leader in Teflon based products has included specific polarities in its company’s philosophy.

The principle of freedom allows each employee to do what he or she considers is right. This freedom has limits. It is restricted by the “waterline” principle.

As soon as a decision could hit the corporate ship below the waterline, a colleague must be consulted to share the responsibility.

As Simon puts it, “while the freedom principle encourages all employees to make use of their full potential, the waterline principle is intended to guarantee that the company does not suffer any serious damage.”

Profound advice!

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Market leaders are always under pressure to meet high expectations. High visibility projects can come in many forms.

Klais, a world leader in organs produced the only bamboo curtain in the world.

Belfor, another world leader in fire and water damage removal, restored 100,000 books after a large fire at the University of Vienna and earned a high profile mitigating the damage caused by hurricanes Katrina and Rita in Mississippi and Louisiana.

Otto Bock - leaders in prostheses - created high visibility by providing a service for theirs and all competing brands at the Beijing Paraplegics.

High visibility projects are often high risk. That’s why when they come off; customers comprehend why you really are number one.

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Ambitious long term goals are one of the markers that distinguish the extraordinary from the mediocre. So, what precisely is a long term goal? Given the obsession with share market’s quarterly results, you might think a long term goal is 3 months or roughly 100 days.

Hermut Hormann, CEO of Voith, world leader for water turbines asks himself how the company will survive in the next 100 years.

Now that really is a long term goal.

In Hidden Champions of the 21^st Century Success strategies of world market leaders; Hermann Simon examines the time horizons that “hidden champions” - medium sized, unknown companies (with annual revenues under $4 billion).

His conclusion: “The goals are long term and executed over generations rather than quarters.”

What is you organisation’s definition of a long term goal?

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Researchers at Caltech and Stanford University recently organized a wine tasting experiment.

Twenty people tasted five cabernet sauvignons that were separated solely by their retail prices, with bottles ranging in cost from five dollars to $90. Although the samplers were told that all five wines were different, the scientists lied: there were only three different wines.

This meant that the same wines often reappeared, but they had different price labels. For example, the first wine offered during the tasting. It was a bottle of a cheap California cabernet - was labeled as a five-dollar wine (its actual retail price) and as a $45-dollar wine, a 900% markup.

The subjects reported that the more expensive wines tasted better. They preferred the $90 bottle to the $10 bottle and believed the $45 cabernet was far better than the five-dollar rubbish.

Of course, the wine preferences of the subjects were clearly nonsensical. Instead of acting like rational agents - getting the most utility for the lowest possible price - they were choosing the spend more money for an identical product. When the scientists repeated the experiment with members of the Stanford University wine club, they got the same results. In a blind tasting, these so called experts were also misled by the made-up price tags. Isn’t it remarkable how powerful our expectations are?

These experiments and a number of other remarkable experiments on how customers make decisions comes from a remarkable book by Jonah Lehr, The Decisive Moment. If you want to know when we go for instinct and when we go for analysis, read this fascinating book. In the meantime, remember that when you price, managing perception is critical.

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Competition

“A competitor is a guy who goes into a revolving door behind you and comes out ahead of you.”

-Anonymous

Selling

“It doesn’t do any harm to dream as long as you get up and hustle when the alarm goes off.”

-Anonymous

Motivation

“Motivation is when your dreams put on work clothes.”

-Parts Pup

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Handling complaints and recovering from delivery slip ups seems to be a dying art.

Great brands deal with customer problems quickly and well.

In our customer experience and sales training with clients such as Toyota, we use a six step recovery approach which resolves around the profound but simple act of an apology.

The HATRIC Six Step Approach to Customer Problem Solving:

Step 1. Hear out the customer without interruption or judgment.

Step 2. Apologize for the problem with sincerity and regret.

Step 3. Take responsibility for the problem and following up.

Step 4. Resolve the problem then and there if possible.

Step 5. Immediately refer the problem on to someone who can solve the problem - if you need help.

Step 6. Compensate the customer so they leave better off that before the encountered the problem.

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Predicting the future and arguably the hardest play in business. Marketing is full of failed ‘new products’ that never took off in spite of the clever and careful planning of their promotions.

Dr. Simon Ramo and Dr. Donald Sugar, both successful high-tech business men offer a 4 measures system for improving the future of your business.

In their book, Strategic Business Forecasting (McGraw Hill 2009), the authors recommend you assign your ratings to rank a promising opportunity.

A. Probability - What is the likelihood a given event will occur?

B. Timing - When might that event occur? Today? Tomorrow? Next year? In the distant future?

C. Impact - To what extent will the event alter your organization?

D. Action Potential - How practical is it for you to act now in order to shape the future?

Assign numbers (1 to 10) to the four ratings (A, B, C, and D) and then add the scores.

The authors provide lots of vivid examples of the Four Measures system in practice.

In today’s roller coaster business world you need all the help you can to retire your predictions.

In the words of Yogi Berrq,

“the future ain’t what it used to be.”

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Chess expert Bruce Pandollfini makes the point in his book, Every move must have a puspose, Strategies from Chess and Life, (Hyperion 2003) “nothing should be played without first considering what the opponent has just done.”

In an ideal play, in marketing as in chess your moves should always do at least two things in convert: foil out opponents aims while fostering ours. “We cant do either properly  if we do only one, and both can be accomplished by first assessing what the other player has done.”

Yet, social scientists who observe chess players eyes note beginners usually restrict their eye scans to just their side of the board. by contrast, experienced players inspect both sides.

I have found the same in marketing, negotiation and sales. Beginners ignore theire competitors. yet seasoned professionals first look at their opponents moves then plan theirs.

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“Life is too short;

for cheap customers,

cheap wine,

and cheap sunscreen.”

All three leave you burnt.

-Harry Mills

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