Topic: COMMUNITY INTEREST
Everest Base Camp April 2017
Many organizations boast that they have solid partnerships in place, but all too often they don’t achieve the potential everyone had hoped for. Why? Typically it is because companies/employees approach their business relationships with a self-interested What’s-In-It-For-Me (WIIFMe) philosophy.
This is understandable because winning is ingrained in us from early childhood; in fact, many organizations formally train their procurement and sales professional teams in the art of negotiations to help them “win.
The hyper successful relationships we studied changed their perspective. They shifted from an us versus them to a we business philosophy.
This a What’s-In-It-For-We (WIIFWe) philosophy. This philosophy helps create mutual symbiotic relationships whereby, working together, the parties achieve game changing results unattainable by working as “me.” Adopting a WIIFWe philosophy was the foundation.
Along the way, research leads us to theories about blondes, ponies, and playing games—theories that, when applied, created the foundational framework for the businesses we studied to achieve transformational results.
Perhaps there is no better place to start than with the blonde who changed economic thinking.
What game you play depends a great deal on how you see the world. Much like the optimist and the pessimist who view a glass differently, economists have shown that people view the world by the type of games they play. Some economists and mathematicians study the games people play and put them into two categories: zero-sum games and non-zero-sum games.
Think about a French fry. Do you remember those childhood feuds over the French fries or the scoop of ice cream that was far too little to share? If you are like us, our parents intervened and made us play nice. My sister always stole my French fries. I always perceived my Mom gave her more French fries. We always fought over French fries.
Yet, in a way, didn’t you and your sibling both feel as if you had lost? After all, you had to share the French fries or ice cream; you didn’t get it all. Sharing has come to mean you get less than what is optimal; you lost something you could have, or should have, had.
In a zero-sum game, there is always a winner and a loser. In order for winners to gain, they have to take something from the losers. Mom always gave me more when I complained. My sister never gave them up.
Many people view the world through this lens of scarcity. There is only so much ______ (fill in the blank: money, opportunity, innovations, etc.). If someone has a lot, it must be because they took it from someone else. There’s only so much pie in the world.
When faced with that last French fry, why not simply look at the world through a lens of abundance. Instead of walking away thinking you have to sneak the last french fry or face Mom cutting portioning, why not respond with “Let’s go make more.”
Seeing the world through a lens where opportunities are not limited and everyone can win opens up an entirely new world to explore.
Economists call this approach a non-zero-sum game. In this case, parties work together to expand the pie, and the pie keeps expanding. Losers can be winners, as there is enough for everyone.
In this game, you might say that 1 plus 1 equals 5. No, this this isn’t fuzzy math; rather, it’s a different way of viewing the world. Yet, is it possible? Absolutely. And it’s the smart approach.
Parties working together bring their unique skills and resources to the relationship. Together, they can achieve more than by going alone—or against each other in a conventional transaction-based approach. They can figure out how to dominate market share, radically reduce cost structures, dazzle customers, or achieve astonishingly consistent quality levels that are more than 10 times what others are providing.
In business, some people you meet see the fries as small and restrictive, meaning that there really are winners and losers. They hunker down to fight over a share of the never-expanding food supply. They want to win at all costs, or at least win more than their fair share.
Yet others believe in an ever-expanding food supply and recruit others to help them cook more.
Unfortunately, far too many businesses and individuals are lulled into something in the middle. We think of this situation as a virtual table tennis match. These organizations say they want to create a win-win situation but think only of themselves. They say you are their strategic partner but keep asking for a lower price. And the minute there is a crisis, people revert back to their old ways.
A classic example is “gainsharing.” Gainsharing is when a supplier agrees to work to reduce costs—often involving investments or significant process or product improvements—for customers. In return, the supplier can “share” in the gains or savings—often as much as half the savings. Unfortunately, things fall apart when it comes time actually to write the check. You get the picture. These companies don’t “get” WIIFWe.
Using a WIIFWe mind-set will create a culture where your business partners can help you find your Pony.
Today’s business environment demands real collaboration. Working together means you must understanding winning…together.
By 1953, he was on his seventh expedition, this one led by Colonel John Hunt, as a Sherpa to conquer Mount Everest. When two members of the expedition, Tom Bourdillon and Charles Evans, failed to make it to the top, Hunt directed the next pair of climbers to conquer the summit. Edmund Hillary and the Sherpa Tenzing Norgay, who had changed his name from Namgyal Wangdi years before, started the climb. On May 29, 1953, both men stood atop Mount Everest.
Journalists clamored to know whose spiked boot was the first to reach a height never before obtained by any man. Both men maintained that they had ascended together. Colonel Hunt, the expedition leader, declared, “They reached it together, as a team.”
But was there really a winner? Did one man spike that first boot before another?
Only as the years passed did Norgay write that Hillary had stepped on top first and that he stepped up after him. Norgay later wrote, “If it is a shame to be the second man on Mount Everest, then I will have to live with this shame.”
The focus of Norgay, Hillary, and Colonel Hunt was on the team and the team’s accomplishments. In fact, Hillary never publicly admitted that they did not reach the summit in unison.
The simple fact is it did not matter who got there first. They both achieved something that had never been done. And both men knew they could not have done it without the other. Mutual success. Mutual reward.
How many times do we see the manure but fail to see the Pony? It all boils down to perspective: A perspective to see problems as opportunities. A perspective to see the art of the possible when others cannot.
Of course, some problems are relatively small and can be dealt with without too much inconvenience. They are tolerable issues with easy fixes.
And then there are those big problems.
Most of us have names for our big problems: Impossible. Impractical. Let’s call them “wicked problems.” If you solve a wicked problem, you’ll make a lot of people very happy.
Microsoft and Accenture call the concept of the Pony “transformation initiatives.” McDonald’s recruits suppliers to help it achieve its “Plan to Win.” No matter what you call it, the Pony represents the potential to unlock value-creating opportunities when others cannot.
The most successful companies have learned to look at their customers and suppliers with a new perspective, a perspective that actively seeks business partners to turn tough problems into opportunities to create a powerful competitive advantage. If you are just looking for cheaper suppliers and not suppliers who drive your quality, you fail.
Find the Pony, create value; create value when other cannot, and you have a real competitive advantage. Solve a wicked problem, and you may even be able to create a competitive advantage that has the power to change the world.
The road to hell is paved with good intentions: Intentions to cooperate; to give-and-take in the relationship. Intentions to play nice.
Usually that works until business happens. Then temptation becomes too great, and one party takes advantage of the other. This temptation eventually gives way to conflict and mutual gains are sacrificed unless countervailing measures have been put into place. These temptations are referred to as transaction costs and are present in every decision, whether it is finding a photographer for your daughter’s wedding or a supplier for your company.
Do it wrong, and your costs go up. Do it wrong for a long time, and no one will want to work for you. You will lose quality talent and have sloths for employees. Companies can burn through so many suppliers that it had to work with some of the lowest quality suppliers in the business.
Given these transaction costs, we have a bigger question: How do you approach and work with business partners and suppliers? Does your approach impact their response and perhaps increase risk? Some may think it doesn’t matter.
It’s easy to write that everyone should play nice. But playing a game requires some basic knowledge of the rules. Not knowing the rules results in chaos. Ignoring the rules leads to frustration. Flouting the rules makes everyone want to quit the game and go home.
Vested is a great game to play. It shifts the focus from WIIFMe to WIIFWe. It has winners and some more winners. It looks for a Pony that everyone can share.
It even has rules.
Following some of the rules will lead to some success. But it isn’t total success.
Playing by all the rules is necessary to minimize the transaction costs associated with any agreement.
Want to play?
Just learn the rules.
Every game has a set of rules. Vested is no different.
Take, for instance, an old game, one universally played. Some historians suggest variants were played by the Egyptians and the Romans as early as 1 B.C. The first printed mention of the game came in 1864, when the game was referred to as nought and crosses. A game for two players working on a 3X3 grid, the goals is to get three Xs or Os in a row.
The rules are easy. Players do not reinterpret the rules as the game progresses. And players have to follow all of the rules to play successfully. Partially following the rules won’t work.
Some people like to modify game rules. That may be socially acceptable if everyone playing knows the variations. However, many people don’t appreciate bending the rules, especially if the variations aren’t explained in advance. Does the word cheating come to mind?
Simply put, rules matter.
Vested follows five simple rules. They are simple to write and simple to understand but at times hard to follow. Vested requires trust and transparency.
Rule #1: Focus on Outcomes, Not Activities
“I studied for the test. I’ve never worked so hard for any class. Is there a curve?“ As academics, this is a question we have heard hundreds of times. Effort matters in kindergarten, especially when it comes to coloring within the lines, but after time, business boils down to getting results.
Unfortunately, we have come to link value to effort, not necessarily results. We brag about the time we spent on a project, regardless of the results.
Focusing on outcomes shifts or changes the conversation. It moves to measuring results, not effort. In fact, our everyday conversations are all about outcomes. How did you do on the test? How did the project turn out? Did the customer buy? Did you conquer Mount Everest?
Rule #2: Focus on the What, Not the How
It was easy to tell there was a problem. An unexpected fall resulted in an arm bending where it normally doesn’t bend. It was painful. Although it is easy enough to know that you have a problem, most of us don’t have the expertise actually to fix it. For that you need a specialist—a doctor who will fix you up.
What most of us don’t do is tell the specialist how to do the job.
One of the greatest paradoxes in business is that we hire experts (suppliers and employees) to help us and then fall into the trap of telling them exactly how to do their job. Did you hire an expert, or a clone to do the job the same way it’s been done for years? Do you focus on hiring those with no experience and then not train them to do the job?
Hire the experts and challenge the status quo, expecting the experts to significantly improve processes and get better results.
Rule #3: Clearly Defined and Measurable Desired Outcomes
A Rolls-Royce in the driveway. A paid-off mortgage. A college degree. A comfortable retirement. Never working on weekends.
What does success mean? How is it defined? For each person, it might be slightly different.
How do you define success? How do you know you are doing a good job?
Knowing how success is defined is a critical rule. It removes ambiguity; everyone knows what we are trying to accomplish (the desired outcomes) and how success will be measured. Everyone should spend time establishing explicit definitions for how the success of the relationship will be measured. Investing time up front in the process is critical to ensure that everyone focuses on achieving the right things.
Just like success, you don’t have to measure everything. There needs to be a means of having clearly defined and measurable desired outcomes, pointing the parties to the success.
Rule #4: Pricing Model and Incentives
A Case for Enlightened Self-Interest
What do a cup of coffee, a computer, and college tuition all have in common? They have a price that is relatively easy to find. Unfortunately, not all business is as simple as buying a cup of coffee; it’s not a transaction. Instead, business happens. Situations change over time. Needs change. Customer expectations change. You have to show up. You have to be on time. You have to be with your customers. If you are not there, your competition is.
For these and other reasons, companies should shift from a price to a pricing model — especially for more complex, strategic relationships.
You need to have a philosophy encourages business partners to work together to innovate. It has to be about winning. But the focus should be on winning together — not winning at the expense of your business partner.
Businesses need to have economics that reward the provider (teacher, physician, supplier, even employee) for delivering solutions, not just activities. When properly constructed, a a winning mind-set will incentivize everyone to work together to solve problems proactively. The more successful the relationship and the outcomes it produces, the more incentives (or profits) the companies (and employees!) can make.
Second, a pricing model should balance risk and reward for all parties. After all, if your partner invests in solving your problem successfully — expanding the proverbial pie for you — shouldn’t they be entitled to a piece of that pie?
The bottom line is: the bottom line matters. And that means watching out for your partner’s bottom line as well as yours. Call it enlightened self-interest.
Rule #5: Insight versus Oversight Governance
Remember the day the baby came home? Numb with excitement and fatigue, you carefully placed the child in the bassinet. You provide nourishment and clean diapers. Then clothes, cars, and prom dresses. Add in concerts, plays, summer camps and allowances, and that baby grows into a beautiful young adult, ready to tackle life’s problems.
Babies takes nurturing, provided over time.
Relationships, like children, need tending. In many cases, contracts aren’t just signed, sealed, and delivered; they are signed, sealed, and then delivered, delivered, delivered, delivered, delivered. Because they are delivered over time, they have to be managed, or governed by the participants. Because of the time component, what you do today has a good chance of being different over time. Business is dynamic. Business happens. Relationships need mechanisms to deal with these changes.
Governance allows for open and honest feedback from all parties in the relationship. It provides the forum to make sure that everyone is winning. It is where we look to make sure that everyone is playing by the rules. It changes as the business (or life) change. Keeping teams from speaking to each other is a recipe for the blinder effect and loss business.
Trust, Transparency, and Transformation
In business relationships, people work together on a foundation of trust and transparency where there is mutual accountability for achieving the sought after desired outcomes. Through the careful alignment of desired outcomes and incentives, business partners give their best to each other. Together they bring the needed skills and resources to not just perform activities but to achieve transformational success.
To say that this represents a departure from traditional business practice seriously understates the case.
Microsoft and Accenture transformed back-office finance operations. The U.S. Department of Energy and KaiserHill transformed one of the world’s most polluted weapon sites to a wildlife preserve—65 years early and over $30 billion under budget. The State of Minnesota and Flatiron-Manson invented new ways to pour concrete in the winter—a Minnesota winter. The I35 bridge was rebuilt in record time and under budget. McDonalds has this figured out. Ask any male counterpart in business and they will say why they go to McDonalds to eat. “The food is always the same, I never have to worry that I get a bad meal.” It’s consistent in a good way.
“Do you see beauty in this bun?” was the question Ray Kroc posed to Mike Ward. Mike did. And as a result, Mike the Baker lived the American dream. And his love for hamburger buns helped him travel the world.
Perhaps one of the more notable McDonald’s store openings was in Moscow, Russia, on January 31, 1990. The line to get into the store was four miles long. People waited nearly 10 hours in subzero weather to get their first Big Mac. And Mike played a part in it. It was an experience that brought Mike to tears as he remembers the long line of customers.
Mike was called in because there was a problem with the buns. They weren’t meeting McDonald’s high standard. Arriving at the store at three in the morning, he realized that the bitter cold was impacting the yeast, and the dough was not rising. The solution: warm up the pans used to hold the dough. The buns rose, and the store opened on time. He forgot to plan for the cold weather and its effect on the yeast. Great leaders always think ahead and of all the downfalls that can happen. Being prepared saves money and your credibility.
They say a rising tide lifts all boats. The same could be said of rising hamburger buns. Mike and his company—Fresh Start Bakeries—have a vested interest in the success of McDonald’s. The more McDonald’s succeeds, the more Fresh Start Bakeries succeeds. And Mike has had fun along the way, helping McDonald’s perfect buns across the globe, including Brazil, Germany, Hong Kong, Sweden, Spain and New Zealand, just to name a few. Mike’s 11-year-old math whiz grandson knows it even better, at least at the time of our interview.
“Grandpa—you have been to 14 percent of countries in the world making buns!”
And it is not the one you are thinking of. It is all about how McDonald’s treats its suppliers—suppliers who sometimes invest years and millions of their own dollars to improve McDonald’s products and processes, giving McDonald’s a huge competitive advantage in terms of a supply chain unparalleled in quality, safety, assured supply—and costs.
In the beginning, there were suppliers like J. R. Simplot, who perfected the frozen french fry and enabled McDonald’s to begin to serve fries made from the highest-quality russet potatoes year round. Or Golden State Foods, which developed the famous “special sauce” for the Big Mac. Or Jack Catt at Keystone Foods, who sunk millions of dollars in cryogenic freezing technologies to do what former McDonald’s CEO Fred Turner thought was impossible—create a frozen beef patty that “was quicker and easier to prepare and was as juicy and more tender than a fresh patty. Cryogenically frozen beef made it possible for McDonald’s to simplify its beef supply chain radically from hundreds of local suppliers to five core strategic beef suppliers—enabling McDonald’s to reduce costs and increase its already unequivocal demand for quality and safety.
Today, the legendary stories continue
Together, McDonald’s, the franchise owner/operators, and their suppliers have created a System to be reckoned with.
It all starts with a three-legged stool. One leg represents the McDonald’s Corporation, another the owner/operators running the restaurants, and the third the suppliers. No leg is greater than the other, as that would make the stool unstable. Each leg in the stool needs to do well for everyone to prosper. The three-legged stool has come to be known as the System, and “System First” thinking is the common behavior demonstrated by those within the System. Leave your ego at the door and you will be “Lovin’it.”
This System leads to some behaviors that are hard to imagine in the “real world,” such as competing suppliers meeting and sharing ideas on how to improve the products they sell to McDonald’s. Or a company creating a new product and then teaching competitors how to make it—because it’s good for the System. Or suppliers meeting with McDonald’s to hear about its “Plan to Win” and then being asked for suggestions on how, together, the supplier and McDonald’s could accomplish these goals. Or doing business on a handshake, not a contract.
Focused. Obsessed. Maniacal. Fanatical. Possessed.
No matter what adjective you use, it probably doesn’t come close to the laser focus McDonald’s puts on quality. And one area this became evident was in delivering a safe—a very safe—hamburger.
McDonald’s knows that its suppliers are just as maniacal on quality and safety as it is. Suppliers such as Keystone Foods and Lopez Foods are proud—even boastful—of their ability to enable McDonald’s to have the world’s safest food supply chain. Ed Sanchez, CEO of Lopez Foods, openly shares a video highlighting the company’s hourly 100-point quality inspection process on McDonald’s website. Keystone opened its doors in 2009 for a USA Today tour to show how its beef is “safer than a school kid’s lunch.” The USA Today article found that McDonald’s tests its beef up to 10 times more than companies selling beef to school programs. When companies are not maniacal about quality, they lose.
And beef sold to schools exceeds normal USDA requirements for meat sold commercially through retail stores and restaurants.
The results? Over 60 million visitors eat under the Golden Arches every day—uneventfully.
Although the Big Mac is not likely to change, much as changed behind the Golden Arches since Ray Kroc founded McDonald’s in 1955.
McDonald’s greatest impact on American business is in areas that consumers do not see. In their search for improvements, McDonald’s operations specialists moved back down the food and equipment supply chain. They invented the most efficient cooking equipment in the food service industry had seen. They pioneered new methods of food packaging and distribution. Indeed, no one has had more impact than McDonald’s in modernizing food processing and distribution in the past three decades.
But ask McDonald’s, and the company will tell you it didn’t do it alone. Success came with the entrepreneurship and leadership of McDonald’s suppliers and restaurant owner/operators. Suppliers and owner/ operators are key legs in the three-legged stool.
This is a radical approach for working with business partners— especially suppliers. Suppliers know they don’t just have a seat at the table; they are critical part of making the System work.
And this is a System to be reckoned with.
It starts with We.
It starts with being humble enough to recognize that “We” is more powerful than “Me.” It is a recognition that together you can achieve more than by going it alone. Sometimes you need a Sherpa to reach your highest potential.
It continues by seeking out like-minded individuals and organizations that can help you. Those individuals with the skills and insights to help you find a Pony, where others simply see a problem or pile of manure.
But most important, it requires a true commitment to play by the rules—to play in a credible and fair manner. Playing nice is hard.
Cheat once and you lose trust; cheat more than one and you are likely to lose altogether. In the 21st century business world, no one will want to play with you if you play like that.
Solving today’s wicked problems requires a different approach. Doing it alone leaves you alone. Today’s best suppliers are firing their bad customers and aligning with their best customers. The best customers are valuing their best suppliers, rewarding them with the opportunity for more business and greater profits.
Get the WE back into the your business, build strong relationships with your suppliers, get the sloths off the tree and replace them with caring, energized rabbits; and watch your business transform.