Ethics aside, there are no bad businesses – only the wrong business model. Successful organizations have the right people interacting in the right way given the conditions. Outcomes are a mix of who and how with a sprinkling (or deluge) of randomness.
One ‘condition’ is the relationships with customers. Amazon sellers interact through Amazon, and whatever information the everything store deems important is what the who needs to figure out how to do. As a result those stores compete on price and stars.
Another ‘condition’ is fickle investors. Money managers prefer clients who aren’t depositing and withdrawing money constantly. So they write letters, go on podcasts, and pitch what they do in an effort to get the right clients. Organizations with a low CAC have figured out the current how.
A ‘how’ we’ve advocated is to always fix your weaknesses. Eric Eager explains an NFL example.
“The Chiefs just got done with negotiations with Orlando Brown, who wanted to be the highest paid left tackle in football. The Chiefs balked, and it’s a great decision. If you pay for a guy to go from an 85% win rate to a 95% win rate, that doesn’t matter nearly as much as taking your weakest guy from an 80% win rate to 87%.”
For NFL offensive lines the conditions are such to fix your weaknesses.
A lot of times we look at the who and the how. It’s the nouns and verbs that are most salient. ‘Hire a new salesperson to make more calls.’ Instead should we start with the system conditions?
Systems are clearer during change. The four eras of consumerism: rural homes and mail, city center stores, suburban expansion, and internet DTC saw changes in the distribution and communication conditions and the dominant businesses changed. System analysis, relative to who and how, is likely underrated.
Average measurements are overrated because they are easy to compute, give a number which implies certainty, and convey ideas about as well as a bunny ears black and white television.
Fixing weaknesses is a good default option. But so is asking about the system. It’s a non-obvious and valuable way to figure out how the who can do their best work. And maybe that means fixing weaknesses.
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