In business there are many axioms, which are held up as unchallengeable truths to end debate, close meetings and stifle discussion. Sometimes these widely and deeply accepted homilies can act as useful shorthand but innovative leaders should be wary of them.
Many of the greatest entrepreneurs have made their name and created their enterprise from disproving the axioms of their day. Columbus, the iconic trader, made his name by challenging those whose world view could not allow them to sail west.
Ford, perhaps the greatest entrepreneur of the early 20th century, challenged the assumption that a high quality car could only be made under the leadership of a master craftsman by inventing the assembly line and revolutionising production.
Ingvar Kamprad founder of Ikea showed the world that flat pack didn’t mean low quality and bad design and Net-a-Porter proved an industry wrong and that luxury clothing most definitely sells online.
Get it live – and keep evolving
My personal bugbears, leftovers from of a world view in which planned production was the dominant business model, are the axioms that tell business leaders that we need to design things in detail before we launch, have detailed plans stretching for years into the future, that we should hero long-term contracts, and to keep things simple.
In the past decade we have seen incontrovertible evidence (in the form of Facebook, Google, early Microsoft and others) that a great way to innovate is to go to market with a rough beta and design and develop ‘live’ in response to the consumer.
This iterative or agile method challenges a whole bundle of axioms that upheld the importance of planning, detailed pre-market preparation, launching with the finished article. He who fails to plan, plans to fail didn’t seem to prevent Silicon Valley from becoming the capital of innovation and wealth creation.
Long-term plans are nonsense
I sense that there is a corporate planning version of this thinking too which is being abandoned. The two or three year plan just isn’t the way many business leaders should work. It’s much more beneficial to have a clear and well communicated overall vision and then a broad set of assumptions for what might happen in the next six to nine months.
Pretending to plan for longer than that wastes incredible amounts of management time imagining scenarios in year two when they could be focusing on more pressing issues in the coming weeks or months. Mid-term plans often mask a lack of long term vision too. I know which one most businesses would most benefit from.
In a similar vein, investors and their businesses routinely place a premium on long-term contracts as opposed to shorter or rolling arrangements. This is often a mistake. While long term deals look easy to model on a spreadsheet and provide some comfort in a risk-management review, they can prevent a growing enterprise from creating a reactive, productive relationship with their customers and suppliers and, in any fast developing market, flexibility is key.
Changing our business model
Take as an example our move to provide our private membership with monthly subscription instead of annual upfront payments. Our financial advisors thought we were crazy – as well as having a damning effect on our cashflow, surely it was a sure-fire way to risk our customer base?
However, the result was the complete opposite. Our retention rate increased and our service improved far quicker than it would have done otherwise. Whenever a member was unhappy with the service for any reason, they would tell us (by cancelling or threatening to) and we could be reactive, thus keeping them on our books and learning what we needed to fix in the business.
This was far trickier with an annual subscription, where customers can give up half way through a year and your business only learns far too late what steps it should have taken. Clawing back disengaged customers, months after they have given up on you is an almost impossible task.
Keep it Complex, not Simple, Stupid!
I also think that the famous ‘KISS’ (Keep It Simple Stupid!) school of business truth is now well past its sell-by date. Technology now allows complexity to be effectively managed, reported and produced. The new truth may be summed up as ‘Keep it Complex’. Life, customers and business opportunities are complicated. If leaders now embrace those complexities they will win their battles against the KISS old-school.
The challenges to KISS are manifested around us by the huge growth in personalised services, self-tailored products and choice (Bag with your own design on it, anyone?)
Obviously, conceptual clarity is imperative, but simplicity of process or production, at the expense of the consumer, no longer pays out when technology now allows complexity and risk to be managed cost effectively.
This is a Copernican revolution. Changing from a strongly centrally planned culture to a business where processes embrace complexity and are built to be flexible to the market is not an easy adaptation but it is one that many businesses in many markets are going to have to make to succeed.
Alex Cheatle is the founder and CEO of
the lifestyle and home management company he started in 1998. The company was a
winner of the Service Business of the Year
title at the Fast Growth Business Awards in 2008 and has offices in London, New York, Hong Kong, Miami and San Francisco.