Founder's Mentality Blog
For many people in business, the “experience curve” has become an artifact of the manufacturing age. While it explained a lot about market supremacy when huge, stable producers like General Motors and Caterpillar led the economy, it is less useful as a predictor of dominance in the digital world.
The concept is simple: The more a company does of something, the more it learns and the better it should get at doing it. The resulting efficiency becomes a major competitive advantage, which only increases as the company gets bigger and gains more experience. In modern industries characterized by turbulence and technological disruption, however, a feisty insurgent can very quickly render a company’s accumulated experience irrelevant. And with the global shift to services, where unit costs are less of an issue, the relationship between experience and efficiency is not so clear.
So does that mean experience or learning are any less important? Hardly. Learning as you grow is the one benefit of scale that comes without all the negative baggage. Adding people, customers, systems and channels creates complexity. But building the appropriate learning systems only improves the company’s speed, efficiency and responsiveness, helping it beat back complexity and maintain the insurgency even as it scales. Despite this, too many companies have shifted their focus to other priorities. Here are five ways to regain the power of learning:
1. Amplify the voices of the customer and the front line. Companies with a strong Founder’s Mentality® obsess over the front line and the customer. But as we’ve noted in our discussions of the westward and southward winds, these voices are all too frequently drowned out as the company grows. The front line is no longer around the table at senior meetings. The customer’s experience with your company is fragmented across too many touchpoints. Learning from these all-important voices requires amplifying them. That starts with realigning the organization so the agenda of the franchise players, or “kings,” is preeminent and the rest of the company is aligned to support it. But it also requires proactive exercises like starting meetings with lessons from real customers (not reports on average customers’ views) and getting away from the desk and back into the field. The best way to know what’s going on in your market is to learn from your customers and the frontline people who serve them. So turn up the volume.
The three elements of the Founder's Mentality help companies sustain performance while avoiding the inevitable crises of growth.
2. Role model the importance of seeking customer insight and don’t give marketing the monopoly. Everyone owns customer insights; it is not the purview of one department or hub. Large organizations tend to assign managing “customer insights” to marketing. Marketing is then supposed to gather feedback from customers so the rest of the organization can use it. But marketing tends to gather insights for its own purposes—i.e., how to market existing products and come up with new features to excite customers. What gets lost are any customer insights around the delivery of the product, the use of the product, repurchase decisions and so on.
Companies with a true learning culture create learning systems that gather and analyze insights regarding customer, employee and competitive trends that together add up to a “single version of the truth”—not several versions, depending on whom you’re talking to. If marketing or customer service are the only departments listening to customer feedback, then product development or engineering may be missing critical insights. A developing trend in supply chain transparency may never get to operations. There are ways to address these issues as an organization, but it’s really a leadership issue. As a leader, you need to create a learning organization and you must make it clear through role modeling that everyone is responsible for listening to the customer and creating a deep understanding of what’s going on in the marketplace. One department might “hold the microphone,” but it’s everyone’s job to listen to what is being said.
3. For each major capability required by your strategy, build the right feedback loops. We talk a lot about capability spikes and how critical it is to excel at the few things that really matter to your business. But knowing whether you are, indeed, excelling requires creating the right feedback loops for each capability. A few years back, the leader of a large technology company related this remarkable story about a flaw in the company’s strategy, which emphasized cost leadership. “When we wrote our strategy we did a massive benchmarking exercise to establish our relative cost position—and we were the leader,” he said. “But we never again looked to see if we were still leading—and gradually we weren’t! We never built in a feedback loop to check our position over time.”
What this example highlights is how important it is to create feedback loops with customers as well as your own people. Learning based on the Net Promoter System® and employee Net Promoter Scores® allows the company to gather customer, employee and market insights on a consistent basis to better understand how well your company is using its capabilities to deliver on its insurgent mission. If your strategy demands you’re world class at something, then put in the right feedback mechanism to monitor how you’re doing over time so you can stay ahead.
4. Make the idea of continuous improvement a cultural norm. The data flowing from these feedback loops is all about creating a culture of improvement. You need to constantly search for new ideas and strike up conversations with those around you to understand how your company can improve. A company without a cultural expectation for continuous improvement is almost never a learning company. You and your people need to care passionately about doing what you do a little better every day.
5. Build a common language for best-practice sharing and encourage peer-to-peer learning. As we talk to companies about feedback loops, it becomes immediately clear that you must also create a common language to encourage the sharing of best practices. If you want your people to learn about how best to work with customers, for instance, you need to create a common vocabulary to discuss different customer segments. If you want to compare lessons from different levels of service, you need to codify and define those service levels. While this has the whiff of complexity, we’ve learned that without a common syntax and set of measures for the few things that really matter, it’s very difficult for the organization to share information and learn from it.
A common syntax also encourages peer-to-peer learning. In most large organizations, the learning systems are “hub-and-spoke.” Someone is appointed to a hub position and sends emails out in a 360-degree arc to people at the end of all the spokes (those doing stuff out in the field). Gradually, he or she emerges with a rulebook or set of best practices. On the face of it, there’s nothing wrong with that—without a focal point, how do you create a center of excellence, where spoke learning can be collected? But if you probe deeper, many hub-and-spoke systems don’t encourage the spokes to talk to each other. Too often, the hub becomes the oracle, the fountain of wisdom, the holder of the “way things get done.”
Consider the marketing departments at many companies. Typically, they have a fixed way of doing things, and the marketing heads see their job as telling those lower down (read, closer to customer) how things should be done. One company we worked closely with to restore a sense of insurgency recognized this as a major problem. The leaders had a simple strategy and a set of “nonnegotiables,” co-created by the franchise players. But several aspects of the strategy demanded a huge jump-start in learning. Initially, they relied on their old hub-and-spoke system, but didn’t get much traction. Then they brought the franchise players together to discuss how to crack one of the nonnegotiables. Various hub executives, such as the heads of marketing and sales, were invited, but the franchise players led the meetings. As the franchise players began to compare notes, there was suddenly a powerful new energy. Leadership realized that the hub loses the ability over time to ask the right questions; the spokes need to chat among themselves.
Four ways scale insurgents simplify their business continuously and relentlessly to free up resources and redeploy them to fund growth.