“Genius?  Nothing! Sticking to it is the genius! …  I’ve failed my way to success.”  

Thomas Edison–

¹ The “Great Recession of ’08-??” requires “next level” insights and tactics to regain healthy profitability. Research studies conclude, however, that only about 5% of all firms in mature industries do significantly “new” stuff on a continuous basis.  Perhaps another 10% of the players might try to copy the innovators to minimize market share loss to those innovators, but often with incomplete knowledge of the whys and hows.

What about the other 85%?  Are they content to fine tune the past hoping that the economic tides of earlier phases of industry life-cycles will return to re-float their boats?  Or do they need new, big, best-ideas-for-them and / or new ways to get around their fears of failure that come with trying something “new”?

Here’s a four-step formula for all companies to become (better) perpetual innovators specifically focused on their own, best, existing opportunities:

1. Think Big with “quantum profit” insights about your business’ internal cross-subsidies between the super-winner and super-loser customers and products.²
2. Push the wheel of learning.³
3. Comfort zone, design and execute “brilliant, little mistakes”.
4. Teach everyone to keep doing the first three steps ever better by making these learning concepts part of the company culture and leading by example.

PICK A MINDSET ― THINK: BIG or SMALL / ACT: BIG or SMALL

We all fall into one of the following four management-style quadrants:

Think small, act small.  This is the most common mindset in small business America, which is why most of the “self-employed” aren’t truly “entrepreneurs” and why they stay small.  Business owners with this view aren’t likely to imagine taking risks to design a better business model to deliver a better value proposition for the right customers in the right niches in their service area.  They’re too busy working in the business to analyze and improve the underlying model.  Within the daily whirl of activity every customer – profitable or not – is a good customer.  Profits are so meager and survival so tenuous that it seems too risky to change anything, so they’ll maintain whatever worked before.

Think small, act big.  This group is quite vocal, but more bluster than action.  They won’t stop telling you how big and great they could be if only they weren’t being victimized by: Wal-Mart; the government; too many unfair competitors; etc.  They can be contentious about how best to do lots of little things, as they confuse the superficial, visible, gimmicky stuff in business with what is strategically substantive.

Think big, act big.  These guys will eventually crash because:

• They tend to go for broke in good times and bust in bad.
• They love sales volume (vanity) over free-cash-flow (sanity); they are too much sail and not enough keel.
• Their concepts may be good – but for lack of getting the details right and thorough execution – they crash.

Think big, act small.  This is the only option that – well executed – will create a winning, business model and generate sustainable economic growth for all stakeholders.  But, how do you: 1) think about the right, best, big ideas, and then 2) fail forward, fearlessly, fast, frugally, flexibly, faithfully (with) fun?  (That’s 8 alliterative F’s)

BEST SOURCE FOR “THINK BIG” IDEAS IN A TOUGH ECONOMY?

As our global credit bubble takes years to deflate, it is best to zero in on both our most profitable and unprofitable activities in order to manage them appropriately.  Waypoint Analytics’ “Quantum Profit Service” (QPS), a web-based, subscription service for distributors will (with a 3-week implementation) rank customers, SKUs, suppliers and sales territories by profitability.

Then, with DVD training modules and online consulting sessions, QPS will provide distributors with a number of radical profit improvement plays that can yield dramatic profit results depending on how well we can:

1. Overcome our fears of: being both unfamiliar with and unskilled at these new, transformational plays; and achieving “bad” results.
2. Push the wheel of learning.
   1. Questions
   2. Experiments
   3. Reflection…..then back to #1 Questions (recycle) to come up with compelling, right questions and theories to “live into” (to comfort zone) before adapting the plays to our unique context.
3. Act Small with “experiments” that are well designed by using the “8Fs”:
   1. Fail Forward Fearlessly (towards some vision within some operating theory in bite-size steps that are small enough that the least courageous amongst us will laugh and say “why not!”⁴).
   2. Fast and Frugally: the smaller the experiment the more: frugally it can be designed; the faster it can be done which overcomes analysis paralysis; and the less costly or noticed any “failure” might be.
   3. With Flexibility:
   4. Once we act, other variables and people in our environment will react to and cooperatively enjoin our action.  If we examine new, experimental conditions and reactions by also looking up and down and sideways, we will always find serendipitous learning, new contacts and opportunities.
      1.  Most experiments are not pure successes, but all outcomes have the potential for learning to try again smarter and differently the subsequent time.  Flexible persistence will win.
   5. With Faith and Fun.  Doing anything new or old (like riding a bike for the first time⁵) will be unsuccessful to some degree.  We must have faith that if we adhere to the 8 F’s, we will: learn-by-doing from the start; get better with practice; trip over new stuff; and move towards next level improvement (mastery) or differentiating innovation.  If we see this all as “fun”, because:
      1. There are no bad outcomes, all is learning
      2. We increase our odds for busting out of our boring ruts and mediocre-to-poor profitability,
      3. Then, we will be even more open to doing this whole process well and seeing the serendipitous benefits too
      4. Failing forward with fun also helps us tip-toe around ego needs for having to always be right.  (Being an expert – on / at the past – is a benefit for judging the law, but outdated and profitless in business where “new value / cost” beats excess-supply, best-practice, commodity solutions.
4. Then, to lead “failing forward” by example, teach all employees – with personal case studies – both good and not-as-good mistakes using the 8 F guidelines checklist.  CEOs, by job definition, make the biggest, most expensive mistakes.  If we share some of our brilliant and less-brilliant mistakes using our new guidelines, then everyone will be emboldened to at least think of good experiments to run by us for critique and approval.A CLOSING ASSIGNMENTIf you think that your company could be doing a more proactively successful job at:
   1. Defending most profitable accounts by taking them to the next level
   2. Stealing and/or cracking target, fast-growth accounts (gazelles)
   3. Turning big losing accounts into winners (lead to gold)

Then skim through the “5-5-5 Kit” at http://merrifield.com.  The kit has lots of wheel-of-learning-type “questions” as well as “theories” and some how-to ideas.  The challenge is to then design an 8F experiment aimed at each subset of high-leverage accounts.

©Merrifield Consulting Group, Inc., Article 2.34

July, 2009